By Alex Tarrant
New Zealand’s unemployment rate rose unexpectedly in the March 2012 quarter to its highest in more than a year, because of a rise in the number of people looking for jobs.
Economists described the data as "unambiguously soft" and said the labour market's recovery, particularly outside of Canterbury, appeared to be "losing momentum." In response to the poor figures, ASB's economists delayed their expectation for a Reserve Bank rate hike til March next year from December 2012, following a similar move by Westpac about a month ago.
March quarter unemployment was 6.7%, according to seasonally adjusted figures released by Statistics New Zealand today. That was up from a revised 6.4% (revised from 6.3%) in the December 2011 quarter. The number of unemployed rose by 9,000 people to 160,000.
Economists polled by Reuters had given a median expectation of 6.3% for the unemployment rate. The 6.7% matched the unemployment rate in the December 2010 quarter. The NZ$ initially dipped to a four month low of 80.6 USc from 81.1 USc after the number.
Excluding Canterbury, the national unemployment rate would have been 7%. Canterbury unemployment was 5.5% in the March quarter, up from 5.0% in December. Statistics New Zealand said the Canterbury figures had a sampling error of 0.9%.
The number of people employed nationwide rose by 9,000, or 0.4%, to 2,230,000. The Reuters poll had given an expectation employment would rise by 0.3%.
But outside of Canterbury the number of people employed fell by 5,000 to 1,905,000 in the March quarter from December.
The employment rate (the number of employed as a percentage of the working age population) rose from 63.9% in December to 64.2% in the March quarter. This was the highest number of people employed as a proportion of the working age population since the June 2009 quarter, after its most recent peak in the December 2008 quarter.
The reason both unemployment and employment both rose in the March quarter was due to more people joining the labour force, which counts those in work (employed), and those actively seeking work but not in it (unemployed).
The labour force rose by 18,000 people from December to 2,390,000, a rise of 0.8%. Of those, 9,000 got jobs, hence the rise in employment, while 9,000 were still looking for work at the end of the quarter, hence the rise in the unemployment rate.
The labour force participation rate (employed and unemployed as a percentage of New Zealand’s working age population) rose from 68.2% in December to 68.8% in March.
“We saw increases in both the number of people in work and the number out there looking for work in the March 2012 quarter,” Stats NZ industry and labour statistics manager Diane Ramsay said.
“This meant participation in the labour force rose to the highest level since its peak just over three years ago,” she said.
Compared with the December 2011 quarter part-time employment rose 2.5 percent, to a new peak in the March quarter. In contrast, full-time employment fell slightly (down 0.2%), Stats NZ said.
The rise in unemployment reflected more women in unemployment, while no more men were unemployed. This meant the same number of men and women were unemployed, it said.
The number of 'underemployed' people - those working part-time but wanting more work - was 107,600 in the March quarter. That was up from 103,600 in the March 2011 quarter. Underemployment figures are not seasonally adjusted.
Economist reaction
Westpac:
An unambiguously soft employment report for the March quarter. The unemployment rate rose above the range of market and RBNZ expectations, all of the jobs growth was in part-time work, and hours worked fell outside of the Canterbury region. The HLFS survey is an unreliable indicator on its own, but it adds to a range of top-down indicators that suggest weak growth in March quarter GDP.
The unemployment rate rose to 6.7% in the March quarter (and December was revised up slightly to 6.4%), well above market and RBNZ forecasts for a steady 6.3%. Total employment rose by 0.4%, largely as expected, but there was a sharp rise in the participation rate to a near-record 68.8%.
The quarterly movements were rather selective, as often happens in this survey, but the overall tone was soft. Male unemployment was steady, but female unemployment more than reversed the sharp drop seen in the December quarter (which we cast a wary eye on at the time). Part-time growth saw another strong increase, rising 2.5%, whereas full-time employment was weak for a second quarter in a row, falling 0.2%.
Both actual and usual (i.e. excluding things like overtime) hours were flat, and actually fell outside the Canterbury region. Within Canterbury, unemployment has fallen over the past year but this has largely been due to a fall in the working age population - jobs are still down in the region compared to a year ago.
Market reaction
The market was primed for surprises on the downside, and the reaction was relatively small. NZD/USD was down 20 points to 0.8070, 2 year swap rates were down 2 basis points.
ASB economists
Although employment growth held up close to market expectations, an outsized increase in the participation rate saw the unemployment rate rise sharply to 6.7% (from a previously revised 6.4%). Because of recent volatility, the trend estimate of the unemployment rate provides a better picture of underlying labour market conditions, and is currently sitting at 6.6%. Over the past two quarters, volatility in the participation rate (which happens from time to time) has translated into volatility in the unemployment rate over the past two quarters. Looking through this, it appears the unemployment remains largely unchanged from levels that have prevailed over the past year. This highlights the subdued pace of recovery in the labour market.
Looking closer at the detail within the report, there are encouraging signs the Canterbury region is starting to recover with employment lifting almost 5% over the quarter. Over the past year, employment in Canterbury has fallen 1.8% as a result of the February 2011 earthquake and resulting CBD closure, with the largest job loss stemming from retail, accommodation and food services industries. Stats NZ noted there has been some offset by the increase in construction employment in Canterbury over the past year. This, along with the recent increase in building approvals, is an encouraging sign the rebuild is now on track to start around the middle of 2012.
Looking at the remainder of the country, it appears the labour market recovery is starting to lose momentum. Employment fell 0.3% over the quarter outside of Canterbury. In addition, ex-Canterbury hours worked have fallen sharply over the past two quarters (declines of 1.3% and 1.2% consecutively). This fall in hours worked has coincided with a decline in full-time employment and a corresponding increase in part-time employment. This suggests that activity may be underperforming businesses expectations, and has resulted in reducing staff hours.
Implications – changed OCR view
Some of the details in the HLFS release added to an accumulation of small negatives for the inflation outlook that having been building up. As a result we have pushed out the timing of when we expect the OCR will first increase to March 2013 (from December 2012).
On balance, the March quarter employment report was slightly softer than expected. Whilst employment picked up close to market expectations, more of this was due to Canterbury recovering while employment growth in the rest of the country appears to have lost momentum. The very subdued pace of recovery in the labour market has seen the unemployment rate has remained elevated at 6.6% over the past year. The unemployment rate is higher than the RBNZ’s March MPS forecast of 6.3%, and is yet another indication the economy is underperforming expectations.
The HLFS results add to several other developments suggesting more caution by the RBNZ this year: the marked decline in commodity prices, particularly over the last couple of months; the NZD, with the strong focus on it by the RBNZ and its resilience even as commodity prices have fallen; and the likelihood of another tight Budget later this month.
But we still judge that the RBNZ is underestimating future inflation pressures, particularly from the strengthening housing market and rebuild of Christchurch. Although we have pushed out the timing of the first increase, we continue to expect OCR increases at 3-month intervals, taking the OCR to a peak of 4% in June 2014.
BNZ's Craig Ebert
How slack is New Zealand’s labour market, really? One could imagine quite a bit, judging by today’s Q1 Household Labour Force Survey (HLFS). After all, its unemployment rate measure bounced back up to 6.7%, from the (revised) 6.4% it dipped to in Q4. Back in tight old days, it went below 4.0%. However, looking at the way wage and salary inflation has already normalised, at around 3.5% y/y, we might wonder if there’s any real slack at all, in this new world of ours. Whatever the truth of the matter, ongoing momentum in jobs growth is set to put the pressure on.
As for how the RBNZ will see the last HLFS, we suspect it will emphasise the soft bits in it, and the impression of added spare capacity the higher unemployment rate gives. It’s worth noting, the Bank, like the market, expected today’s unemployment figure to be 6.3%. This can only encourage our central bankers to err on the side of delay (even toy with the idea of a rate cut). But that would only be for the Bank to risk over-stimulating the economy into inflationary pressure all over again, in our opinion.
The markets have been on a bit of a see-saw as they’ve digested today’s labour market statistics. The knee-jerk was negative, related to the jump in the unemployment rate, then came a bit of stability, as the good news of employment and participation was absorbed. On balance, however, a depressive tone dominated. By the close of luncheon, the NZ dollar is down about a quarter of a US cent and wholesale yields are lower by about 5-7 basis points. The latter reinforces a view on the Official Cash Rate as slack as New Zealand’s unemployment rate appears. However, we don’t see how it can be all that slack, given the rate of wage inflation already, and the strong employment momentum in train. And so we remain averse to softening our view on the OCR.
(Adds initial currency drop, underemployment, Stats NZ comments, Westpac reaction, ASB reaction, BNZ reaction)
The charts below detail unadjusted figures:
Unemployment
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80 Comments
It would have been nice to know Alex where these 18,000 new additions to the labour force (half of which got jobs, half of which didn't) came from. In what proportions are they - school leavers, university grads, immigrants, persons returning-to-the-workforce etc. As I just wonder whether this is a trend we can expect more of - or whether it is an exception to the norm.
And regards this statement;
The number of unemployed rose by 9,000 people to 160,000.
Is "unemployed" a count of those headcount increases to the unemployment benefit? So did such benefits being paid rise by 9,000 over the period in question? If not, what did unemployment benefits rise by?
Will try find out that first q when back in the office Kate.
In regards to the second one - unemployment in this survey just relates to those actively looking for work but not in it. So different from number of those on the benefit. Dole numbers are released every month (I think).
A number of unemployed can't get the DBP as their partner's income or living situation means they're not eligible.
Cheers
Alex
New Zealand's Finance Minister Bill English is set to deliver a second consecutive 'zero budget' in May, as the government here tries to reach its self-set goal of returning its books to surplus in the 2014/15 year.
Yeah Right!
Jeepers. Something for everyone in these numbers - rising headline rate, but also employment rising with expectations. Canty strength appears to be cancelling out weakness in the rest of the country, and a big jump in those looking for work (is it because they need it, or because they've seen strong confidence surveys and thought now's the time to get back in?).
Full time employment down to its lowest since the September 2010 qtr.
Possibly not as bad as the headline rate suggests, but on balance it's not very positive either.
Our one sided economy is just the receipt for disaster and a redundancy explosion. Rental, hiring and real estate services – plus some others - wow !??
New Zealand in comparison with Singapore:
http://www.guidemesingapore.com/blog-post/singapore-life/major-industries-in-singapore
In order to avoid disaster, I’m wonder if the next step of the government, is to open the floodgate for immigration of the rich.
Gibber - what I mean by “open the floodgate” is the government actively and on a larger scale encouraging “the rich” from Europe/ USA to immigrate to New Zealand.
Some of such increased activities are obvious here: http://www.national.org.nz/Article.aspx?articleId=38062
Gummy - there are still 100’000's of intelligent capitalistic swine’s over there just waiting for a fiery dinner invitation by Banks/ Key sponsored by dotcom and a real estate buddy of Key.
Booomm time for NZproperty continuous - in the face of mass -unemployment !!!
..... when the game is up for the Germans , and their use of the Euro to benefit their economy at the expense of everyone else in the Eurozone is fully understood by the populence , then the fire-works will really begin .....
Like it or not , the EU has run roughshod over the democratically elected government's of all EU participant countries ........
Given the Aussie move down by 50bps; and still very soft data here, do we have to wait until June 14 for Bollard to react, or can he use his initiative earlier? Can he look somewhat beyond his infaltion target and see NZ's competitiveness furrther eroded month by month?
I would have thought the situation calls for urgent and relatively dramatic action.
If you took the Current account as arguably our biggest problem- especially if we actually wish to own anything here ourselves over time- then his solution in my opinion would be better to be money printing paying off debts- or at least not expanding new ones offshore.
Such money printing would not in itself increase demand here; but the drop in the dollar that would result would make us more competitive, and so suck up some of the unemployment. There would be a side benefit of lower interest payments offshore.
No doubt at best he will reduce interest rates first. Better than nothing, but it may not reduce the NZ$ until our rates are close to the zero that applies in the UK, Europe, the US, Japan and other western countries. And yet the reduction in interest will give more disposable income here, probably worsening the current account, without making us more competitive until the $NZ does drop.
And yet the reduction in interest will give more disposable income here, probably worsening the current account,
Are you assuming there are more indebted people than not?
If so where's the need to do any of which you recommend as the Aussie banks will just up the interest rate margins and fees to cover the lost transfer value of the NZD/AUD pair.
And Inflation will explode as the Kiwi drops - is there any other reason why your plans have been ignored to date. Besides the US is more than capable of matching any devaluation intentions you may harbour on behalf of whoever you think needs the benefit of higher import costs.
Stephen,
I assume there are more indebted people than not in NZ, partly because the Reserve Banks all around the world seem to see interest rate reductions as stimulatory, and why would they be if that were not true here? Also I assume that over 40 years of current account deficits mean that NZers collectively are indeed massively in debt. Billions this year from Switzerland alone demonstrates the Swiss are the creditors (from money the Swiss bank just created out of thin air to keep their exchange rate down), and many Kiwis are debtors. Having said that, if you are hinting that interest rate reductions are a very blunt tool, then I agree with you- that is a key point I have tried to make in other forums- the Reserve Bank has been uesless in applying the range of tools other Reserve Banks use; while their total singular focus on inflation ignores other problems from housing bubbles to uncompetitive exchange rates; and therefore employment and the current account.
I'm not sure the Aussie Banks have total pricing freedom to do what they want (in that the market would react); and collusion is a criminal offence. Nevertheless that they would try and recover some margin is accepted. In a bold world Kiwi Bank actually could easily be further capitalised to compete properly.
On the inflation effect; If you accept that a cumulative current account deficit is both unsustainable, and exactly equal to our loss of ownership of our own assets each year (and which polls suggest we would prefer to keep), then it seems to me that a drop in the exchange rate is easily the most market oriented way of getting the current account back into balance. Imported prices will climb to some extent- although I believe some overseas suppliers price to the market, and not cost plus. Local suppliers will be more competitive, and would have no particular reason to raise prices. Exporters would be assisted. While there is high unemployment, wage growth will be modest; but employment will grow (or not go down so fast), with a reduced exchange rate.
The current account deficit of 4-5% of GDP suggests our exchange rate is overvalued by roughly that amount (there may be a multiplier effect either way). Some inflation in imported categories, or overseas travel, would send the right price signals to consumers to adjust their behaviour collectively.
The alternative route to be competitive- to drop everyones' wages, has benn proven worldwide to be impossible to achieve- see Greece, Spain and the rest of Southern Europe.
I realise this solution is not pain free, but would prefer NZ was a place that in 1-3-5-10-20 years was still likely to be an attractive place for my kids, and on the current path, it won't be.
While the rest of the world are playing currency wars, the Greens are right, being a pacifist is almost suicidal.
I forgot to add that New Zealand is sufficiently irrelevant that if we devalue our currency through say QE, the US or others won't bother to fight it, or their relativity with everyone else would go down. For the US to come down 10% it would probably have to print another trillion US; and that would cause a reaction from China and others. If we print say $10 billion to $20 billion, which would nicely pay off some debt, and might well devalue the Kiwi by say 10%, then the effect on world trade would be miniscule.
I believe the UK has printed 325 billion pounds or 23% of their annual GDP to keep the pound down, and to avoid borrowing/selling assets.
The US has printed US$1.9 trillion or 13% of their annual GDP, since the GFC
I believe our nominal GDP is $200 billion; 10% of that would be $20 billion.
For other reasons the US and the UK are likely to print a whole lot more anyway; but all the more reason why we need to act. there may be other ways to do it; but I don't think the government are even thinking about it. They still seem to be cheerleaders for a strong currency, but sort of want to keep some farms. They are mutually exclusive outcomes.
No surprises in this data at all. The sad thing is that the real rate is actually a lot higher than this as a lot of people don't even bother registering as unemployed as if they're partner earns at least $60k you are not entitled to any benefits. I reckon the real number is a couple of % points higher.
Where are the 170,000 extra jobs promised to us in the Government budget ?
what a load of BS all that was.
NZ economy is in dire straights - thank god there is farming to keep it alive. The country is heading for big trouble / recession very shortly IMHO and bankruptcy in about 10 years time
"people don't even bother registering as unemployed", yes I agree...I'd like to know that % as "a lot" is rather un-defined. It has probably gone up in the last few years as a % as 40+ public service employees have been let go I suspect, wouldnt be surprised if it adds 1 or more %....in the US it doubles the rate.
regards
Sorry but commodity prices are dropping rapidly and farmers are beginning to squeal.
http://www.stuff.co.nz/business/farming/6846187/Commodity-prices-tumble
totally agree, and thats why I left.
Nz has a govt bereft of strategy and initiative, they along with the banks have been complicit in spruiking the economy beyond its miserable reality
things aren't so great in Aus either, but relatively speaking quite a bit better than NZ
Govt should abandon its surplus goals and stimulate growth and employment
Didyer see Andrew " Twiggy " Forrest's speech ? ....... the new super profits mining tax is gonna impinge upon junior explorers and start-ups , and leave the big miners comparatively unscathed .......
...... anyone who thinks that only NZ has short-sighted simpletons in government needs to train their gaze towards Canberra !
...... ah , Australia , ... so rich , so big wide & red ....... so fecking stoopid ......
Yes, it's hard to say how many "a lot" is.
All I know is that myself and most my friends have never bothered registering as unemployed as with the other partner (fortunately) working there is no point. I would say the real rate in Auckland is more like close to 10% (rahter than the 7.9% reported).
Can you imagine how bad it would be if all those people had not left for Australia in the past few years ?!! It's actually a good thing perhaps for those that are left - at least it gives them a higher chance of securing and keeping a job
Nothing to do with registering.
Unemployment numbers are "statistical" not "factual" they are the product of the "household survey". Dont know what the sample population numbers in NZ are but in AU the ABS selects a sample of 20,000 households, and those households are surveyed once per month. The sample population used to be 40,000 but was cut back in 2007 to 20,000 when Rudd was elected. In America the Non-Farm-Payrolls are compiled the same way by the Bureau of Statistics from a household population of 400,000. Significant changes to the unemployement rates and participation rates can and will occur when a new sample is selected every 6 months. Someone who becomes unemployed will not appear in the statistics unless they are a member of the "survey sample"
The USA pubishes every Thursday night the NJC (New Jobless Claims) which is factual. It is an actual number produced by pressing a button in the Social Security Department. New Zealand and Australia could and should provide those numbers but cant find the button to press.
The problem is the lack of quality information .. a good example of this is property .. have a look at the folllowing link of information provided in various countries when it comes to property activity and look at the bottom link on NZ
http://www.fxwords.com/h/housing-reports-by-country.html
Why? Got to keep the mushrooms in the dark. It is the absence of real data that enables the massive debate here at interest.co.nz about property.
Many of the prognosticators here offer opinions that amount to predictions that stretch far out into the future. So far out it is safe to make those predictions because it is highly unlikely any one will have kept a record as to when the prediction was made. The most common one made here with changing dates is the "coming great depression" within the next 5 years. It was made here in 2009 and again this year 2012, but the forward date remains 5 years away. And you have to analyse the wording carefully. I have given you a prediction thats is a fixed date, it is soon and it will be proveable. I'll make it easier for you. The sun will not rise tomorrow. Think about it.
Not at all. I'm trying to make a point about predictions, and communications using the written word. They need context and time. At a place a bit south of New Zealand, where the emperor penguins live the sun did not rise this morning and it won't rise tomorrow morning either, or for that matter on the 1st of June 2012..
...... and I predicted that the DOW would surpass 15 000 by year's end .....
Mind you , I predicted Goldmoney Sachs stock to reach $US 250 in 2011 ....... I think they got halfway there .......
..... I really should leave prognosticating to true professionals , such as Bernard Hickey , Nicole Foss , and Ken Ring ....
Rubbish.
Just look around the world in terms of what rising unemployment does for house prices - UK, USA, Spain etc. The evidence speaks for itself.
People become more cautious about jumping in to debt, because they have less confidence in their employment future.
People who are not confident about buying are renters already so there won't be any increase in number of renters.
More young people will also live at home with their parents rather than renting.
You really need to try harder with your arguments.
High unemployment means fewer houses built, means greater shortages in the months to come because the poulation will keep growing.
So it adds up in the longer term to higher prices, for rents and house prices.
By the way Matt in Auck ... that comment of yours "You really need to try harder with your arguments"... seems like you have picked up that Aussie arrogance already!
Have thought long and hard about the accomodation supplement .. and wolly's thoughts on it .. and have concluded it's an undercover Government conspiracy to "grease the banks" .. follow the money trail .. particularly if the supplement is paid to a renter who is renting a negatively geared property ie it has a bank mortgage on it .. follow the money trail
Taxpayer --> Government --> WINZ --> Tenant --> Landlord --> Bank --> poof - overseas
or in the case of Government borrowing from overseas
O'seas --> Government --> WINZ --> Tenant --> Landlord --> Bank --> poof - overseas
Currency has played its part. Manufacturing is really struggling in NZ, a lot of job losses. Compare this to USA whose currency has been very low recently who are having a manufacturing boom not seen since 1940s. What this all means is population flows move away from NZ to places where there are jobs.
The next decade is going to be nothing like the last
Wishful thinking isnt good for your wallet IMHO, I dont think it willl because,
1) it has to be led, but its leaders are pathetic and mostly too busy lining their or their sponsors own pockets...however it is possible if they one day get an FDR, but the Republican party has to destroy itself first.....the Nation might even default....and it need energy, see 2)
2) I dont think shale oil will be its saviour, however much is made of it, but by ppl who dont understand EROEI... Even if it is capable of say 12mbpd, that is 2020+ and later and there are no other sources except for canada (and that is 5 to 1 or less EROEI) for the rest of the world. So sure even the biggest optimistic outcome in decades that is shale pays off then the US might be Ok but the rest of us not really.
3) Its used most of its other raw minerals.....
4) Who does it sell/export to? everyone else is in dire straights, see 2)
5) What does it produce? its industry is severly reduced, that has to be built back up, see 1), 2) and 3).
regards
We should follow the us example and devalue the currency now. Sum ppl with big debts leveraged against property will cringe. However we have negotiated to this point largely off the back of our neighbors - the lucky country. Now that the wheels are coming off across he Tasman we have reason to be concerned. If as a resukt the aussie banks take a hit - serves them right as they together with Bollie and the property spruikers have had it too easy. Growth through our griculture and manufacturing sectors won't kick in unless the dollar falls. At the moment we are bobbling along with a stubbornly high currency and shedding our labourforece. Take sum pain now!
I've been on several NZ MSM news websites and there is minimal discussion of this poor employment data. Unbelievable. The media is frickin docile in NZ. Here in Aus, the media would be slamming the govt with outcomes like this, and rightfully so.
Nz is asleep at the wheel and is going to suffer big time for it
Added the anomaly of Boomers pushing on, well into the seventies refusing to make way for those needing the experience that is " being employed".
But don't you just get sick to death of the contempt for your intelligence, repeatedly shown by this Administration.........ad hok Corporate meetings to deal with crisis to crisis events....the overall plan starting to leak like a sieve....Fonterra's strategy coming apart at the seams and now hatching flies in the Govt's ointment.....
Oh yeah ...this is all going swimmingly......just as the deck chairs disappear beneath you.
Salut Bernard .. espérons que vous êtes bien, bon de vous voir dans le siège du conducteur de l'Etoile de la Mort .......... nous avons joué, ...... sympa!
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