Employee confidence edged up in the December quarter from September, suggesting that "the worst of the job layoffs could be behind us," the latest Westpac McDermott Miller Employment Confidence Index showed.

However, despite the overall improvement in confidence, a measure of workers' perceived job security fell over the quarter, which may partly explain why consumer spending has been relatively slow to respond to improving consumer confidence, Westpac said.

The index rose 1.3 points to 104.3 in the December quarter, bringing employment confidence back to levels last seen a year ago. An index score over 100 indicates more optimists than pessimists, while a score below 100 indicates the opposite. Despite the increase, the index remained below the survey average of 122 since 2004.

"What we find most encouraging in this quarter's survey is that for the first time in two years, confidence in current conditions has improved," Westpac Senior Economist Donna Purdue said. "On its own, that suggests that the worst of the job layoffs are behind us."

The current conditions index was boosted by fewer respondents saying they thought jobs were hard to get, at a net 59.5% in December, from a net 66.5% in September. The current conditions index rose off a record low of 74.4 in September to 77.8 in December, its first increase since September 2007. "Still, at these levels the overall message is that current labour market conditions remain tough "“ just not as tough as they were back in September," Purdue said.

Perceived job security fell during the quarter, with a net 13.2% of respondents saying they thought their job was likely to be more secure in a year's time from net 18% in September. "Lower job security may partly explain why consumer spending has been relatively slow to respond to improving consumer confidence," Purdue said. "However, with economic conditions now improving quickly, we expect job security and consumer spending to follow suit."

Here are the questions that are asked for the confidence index:

1. Do you think jobs are plentiful or hard to get?
2. Do you think job opportunities in New Zealand in a year's time compared to now will be more plentiful, harder to
get or about the same?
3. Do you earn more, less, or the same in your paid work now compared to this time last year?
4. Do you expect to be earning more, less or the same in your paid work this time next year?
5. Would you say your job is likely to be more or less secure over the coming year than now?

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News

Westpac McDermott Miller

Donna Purdue

Economy

Employment confidence

The first two questions are asked of all respondents (1556), the remainder to those declaring they are in paid work
(1056 or 68% of respondents).

Here is the release from Westpac:

"NZ employees were feeling a little happier about employment conditions as 2009 came to a close," said Westpac Senior Economist Donna Purdue. According to the Westpac McDermott Miller Employment Confidence Index, confidence lifted 1.3 points to 104.3 in the December 2009 quarter, bringing confidence up to a level last seen a year ago. Even so, confidence remains well below the survey average (since 2004) of 122. An index above 100 indicates there are more optimists than pessimists, while a number below 100 indicates that pessimists outnumber optimists. The survey was conducted between 1-14 December.

"What we find most encouraging in this quarter's survey is that for the first time in two years, confidence in current conditions has improved," said Mrs Purdue. "On its own, that suggests that the worst of the job layoffs are behind us."

Compared to the September quarter, fewer respondents believed jobs were hard to get (at a net 59.5% in December, from a net 66.5% in September), while a net 15% of respondents still said they were earning more than a year ago (broadly unchanged from September). As a result, the Current Conditions Index lifted from a record low of 74.4 in the September 2009 quarter to 77.8 in the December quarter "“ the first increase since September 2007. "Still, at these levels the overall message is that current labour market conditions remain tough "“ just not as tough as they were back in September," said Mrs Purdue. "

In contrast to current conditions, employees remain overwhelmingly optimistic about the future. The Employment Expectations Index was broadly unchanged at 122 through the quarter, close to the record high of 125.1 reached in December 2004. "A net 16.6% of respondents said they expect job opportunities to be plentiful this time next year, up from 14.4% in the September quarter and the strongest response to this question in the survey's history," commented Mrs Purdue. Meanwhile, a net 36.2% said they expect to be earning more next year, up from a net 34% in September.

"Overall, the message on the earnings front is consistent with the RBNZ, and our, forecasts which see annual wage inflation troughing in March 2010, and steadily picking up from then on."

Despite employees more upbeat outlook, perceived job security fell during the quarter, from a net 18% in September to a net 13.2% currently. "Lower job security may partly explain why consumer spending has been relatively slow to respond to improving consumer confidence," Mrs Purdue said. "However, with economic conditions now improving quickly, we expect job security and consumer spending to follow suit."

"Employment confidence rose a modest 1.3 points in the December Quarter 2009, following a return to net positive sentiment in September", announced Richard Miller, Managing Director of Strategic Planning Consultancy McDermott Miller. "The Westpac: McDermott Miller Employment Confidence Index now stands at 104.3."

"Employment Confidence grew most in the metropolitan (up 2.9 points to 106.0), and rural centres (up 1.4 points to 104.2), while secondary centres experienced a fall (down 2.3 points to 102.1)", he observed. "However employment confidence in all centres is now well above the historic lows felt in the March 2009 quarter."

"Optimism amongst Private Sector employees continues to grow (up 2.0 points in the December 2009 quarter to 106.3), while Employment Confidence of Public Sector employees remains virtually unchanged (down from 102.0 in September to 101.8 in December)", said Richard Miller. "Employment Confidence among Private Sector employees has now been growing faster than among Public Sector employees since June 2009" he noted, "so the gap in confidence between the two groups is widening".

"This trend is strongest in the metropolitan centres where belief in an accelerating economic recovery appears to be held most strongly by the private sector, whereas public sector employment confidence continues to be restrained as a result of Government policies to contain growth in its own expenditure", concluded Richard Miller.