The figures will be either good, very good, or excellent. And yet, and yet, they could potentially be very troublesome. Ironic? A bit.
Yes, that is right. Any meaningful drop in the unemployment rate when the suite of labour market statistics is released on Wednesday, August 3 won’t be regarded as either ‘good’, ‘very good’ or ‘excellent’ by the Reserve Bank (RBNZ). No. It will be a right royal pain in the monetary policies. And the fact that the figures will likely show the biggest rates of pay increases in well over a decade will not help either. At all.
Among the three most key economic indicators (including GDP and the Consumers Price Index), it is the labour market figures that have perhaps emerged as the key ones this year - and the ones to be most watched.
Border closures, meaning limited access to workers from offshore, and an economy effectively trying to grow too quickly for its capacity, have helped to produce a super tight jobs market. The rising cost of living has seen upward pressure on wages - with staff able to get higher wages due to the shortage of available labour.
So, as for the forthcoming labour market data for the June quarter, any unemployment rate that is even lower than expected, with perhaps some further bubbling wage rises would see the RBNZ moving again behind the eight ball in the battle it is having with inflation - a battle that is seeing it hike interest rates at a speed never seen before in New Zealand.
And the chances are that we will see a new record low unemployment rate when the figures are released on Wednesday.
The rate has been at a barely-existent 3.2% for both the December 2021 and March 2022 quarters. But economists think it will take another dip for the June quarter and some think it has a little further to go down after that.
The Reserve Bank itself thinks the rate will blink down to 3.1% (as per its May Monetary Policy Statement, or MPS) for the June quarter, before starting to climb again - reaching 3.5% by the end of the year.
Westpac economists think the unemployment rate for the June quarter will be 3.1% too. However, ANZ economists forecast a figure of just 2.8%, while ASB's economists are saying 3.0%.
BNZ head of research Stephen Toplis said last week that ongoing labour market tightness is "our greatest fear" in terms of the upward pressure on interest rates.
"The RBNZ forecasts the unemployment rate to rise to 3.5% by the end of this year. We, in contrast, see it falling to 3.0% or below."
Toplis said an easing in the very tight conditions in New Zealand's labour market is a "critical precondition" for the RBNZ to stop raising interest rates,
The employment figures are of course of much more vital interest to the RBNZ now than once they were.
Time was that the single goal of the RBNZ’s monetary policy was achieving ‘price stability’ - most recently defined as keeping inflation in a 1% to 3% range (oh, they wish!) with an explicit target of 2%.
This Government added a second goal, and now the RBNZ must, and I quote from the central bank:
“Support maximum sustainable employment, considering a broad range of labour market indicators and taking into account that maximum sustainable employment is largely determined by non-monetary factors.”
So, what exactly do they mean by ‘maximum sustainable employment’? And isn’t 3.2% unemployment good then?
Well, the RBNZ gives this definition for ‘maximum sustainable employment’: “The level of employment at which the job market is tight, but not so tight that inflation is rising out of control.”
Hmm. “Not so tight that inflation is rising out of control”. That might be the problem right there. The labour market is as tight as a bowler hat on an elephant. I will leave it to your judgement as to whether you think a current (as of June quarter 2022) annual inflation rate of 7.3% is ‘out of control’, but it is not exactly behaving itself, is it? Not when it is supposed to be comfortably settled somewhere between 1% and 3%, and preferably exactly 2%.
A fair few people, myself included, did not think including employment in the monetary policy mandate was a good idea. There appeared great potential for the twin goals (employment and inflation) to conflict with each other at various stages - IE we could be short of ‘sustainable’ employment levels and yet with some inflation to fight. The inflation target would be saying we should raise interest rates, but the employment target would be saying we should reduce them. A contradiction.
Currently there is no such contradiction and I suppose we should be grateful for small mercies. The high rate of inflation and the hot state of the labour market are both telling the RBNZ to raise interest rates.
So, the fact is, if the latest unemployment figures do show a dip, then the RBNZ will be reassured that it is doing the right thing by currently stepping on the interest rate accelerator.
If the labour market proves to be even tighter than expected, however, that’s when things could get a little curly.
The RBNZ will soon be seriously organising its thoughts for the next Official Cash Rate Review.
The expectation is that it will again raise the OCR by 50 basis points, this time to 3.0%.
If the job market is even tighter than the RBNZ thinks, however, (and therefore the potential for a wage-price spiral is greater), then you might even see some consideration of a 75 basis-point rise.
The wholesale interest rate markets are currently ‘pricing in’ a rise of a little over 50 basis points for the August 17 OCR review, so, a 75-pointer is not currently seen as particularly likely. Hotter unemployment figures, perhaps coupled with higher-than-expected wage rises could, however, certainly bring a 75-point rise into play.
Just on wages, Stats NZ offers a variety of measures. It said that as of the March quarter private sector ordinary time hourly earnings had an annual increase of 5.3% to $34.36. ANZ economists see private sector ordinary time earnings rising by an annual 5.8% as of the June quarter. Any acceleration of the rate of wage increases - which is obviously a likely outcome with a tight labour market - will further pressure the RBNZ to keep pushing the interest rate 'Go' button.
So, these labour market figures to be released on August 3 matter a lot.
The tightness in the jobs market is a curious mixed blessing for the RBNZ. On the one hand there is its potential contribution to inflation - but on the other hand the full employment means that people are better able to cope with the impact of higher interest rates, such as higher mortgage rates.
Nobody's expecting to see the unemployment rate rise at this stage - but as interest rate rises bite it presumably will start to at some stage. And that will be a key moment for the RBNZ.
Any sudden blip upward in unemployment would call for a rethink of the OCR hiking strategy.
Remember, the RBNZ has signalled the OCR is likely to rise to nearly 4% by the middle of next year and only to begin slowly falling in mid-2024.
Any signs of slack developing in the work force, rising unemployment, more people struggling to meet high mortgage payments and keep up with the cost of living, and this could see the RBNZ forced to back off. Particularly if this is all accompanied by lower spending and a marked slowdown in the economy.
As said above though, the likelihood is that for now the labour market's going to remain hot. Plenty to keep our eyes on here.
Here is what some of the country's economists have to say:
ANZ economist Finn Robinson and chief economist Sharon Zollner say that finding workers is the "most challenging constraint" that businesses are facing right now.
"With domestic inflation pressures only continuing to intensify over the first half of 2022, this tight labour market is turning into a headache for the RBNZ. Low unemployment is good. But it can be highly inflationary if it’s due to the excessive (in hindsight) policy stimulus that’s been flowing through a supply constrained economy (as opposed to, say, a structural improvement in the ability of the labour market to match job seekers with vacant positions)," they say.
"Right now, demand for workers is still miles ahead of supply – and that’s going to be a key driver of domestic inflation pressures over the coming year.
"So for the RBNZ, good news will be bad news next week. They’re aiming to put the inflation genie back in the bottle – and every incremental tightening that we see in the labour market makes that job harder. We’re anticipating the RBNZ will be hiking in 50bp increments through the rest of 2022 (bringing the OCR to 4% by year end). The catalyst for the upward revision to our OCR forecast was the starting point surprise for non-tradable inflation. But it’s also notable that our forecast for a 2.8% unemployment rate is lower than the RBNZ’s May MPS forecast of 3.1%.
"Should the labour market surprise the RBNZ with its strength, it will lower the bar for ongoing 50bp hikes. It could even put a 75bp hike on the table in August should the RBNZ become concerned that they’re still not raising interest rates fast enough given the scale of the inflation challenge.
"But there’s no sign that what the RBNZ is doing isn’t working (look at housing), so ongoing 50s look more likely.
"Our central view remains that signs of slowing demand in the economy will become increasingly hard to discount over the second half of this year – and that should give the RBNZ the leeway to ease off the brakes (ie stop hiking) after the OCR hits 4% at the November MPS. Monetary policy takes time to flow through to the real economy and finally price pressures.
"By the time we get to November, it will be just over a year since the first OCR hike from the record low of 0.25% - and well over a year since mortgage rates started rising. And over that time, we’re forecasting the RBNZ will have delivered 375bps of hikes – the fastest increase in the OCR since it was introduced in 1999. That’s going to take heat out of the economy – it just takes 1-2 years to fully feel the effects on inflation and the labour market. But we will feel it."
ASB senior economist Mark Smith says The labour market figures will still be "clouded by Omicron disruptions" but are expected to depict a strong starting point, with employment still well above its maximum sustainable level.
"Widespread and acute worker shortages should keep employment growth sluggish, the unemployment rate at record lows, with other labour utilisation metrics extremely stretched. Wage growth is expected to accelerate to its highest annual rate since 2008 and become increasingly broad-based over the second half of 2022 as a wage-price spiral unfolds," he says.
"Worker shortages rather than the rocketing demand for labour is expected to see the current period of tight labour market conditions persist over 2022 and likely beyond that, necessitating a period of restrictive monetary settings. We expect 50bp hikes in August and October and a 3.75% OCR peak by the end of the year. A relaxation in tight labour market conditions is needed to cool inflation, and we have flagged a 2024 timeframe for when the OCR can move to less restrictive levels."
In terms of OCR hikes, Smith notes "there is a lot already priced in, including 55bps for August and close to 150bp by the end of the year, with an OCR endpoint of around 4%".
"Strong labour market prints should provide a boost to near-term market pricing and the NZD [New Zealand dollar] as markets factor in the RBNZ increasingly front-loading rate hikes and potentially extending the rate hike cycle.
"What then for the RBNZ?
"On both its labour market and inflation metrics, past monetary settings were clearly too lax.
"High inflation looks to be increasingly entrenched and domestically driven and this necessitates more forceful action and tough talk by the RBNZ to ensure future inflation outcomes align with the 1-3% inflation target.
"We expect the RBNZ to deliver at least a 50bp hike in the August MPS (we would not rule out a 75bp lift) and to marginally bring forward the May MPS rate hike profile while keeping a circa 4% peak."
Westpac acting chief economist Michael Gordon says the labour market remains "a crucial part of the inflation-interest rate nexus".
"It’s still true that much of the surge in prices to date has been due to forces beyond New Zealand’s control. But a tight labour market is the mechanism through which an initial price shock could become ‘inflation’ in the sense of an ongoing process of rising prices.
"We expect the June quarter labour market surveys, released next Wednesday, to show a further drop in the unemployment rate to a fresh record low. The March quarter was characterised by disruptions from the peak of the Omicron wave, which were still present, but less of an issue during the June quarter. We also expect a further lift in wage growth in nominal terms, though still not catching up on the surge in the cost of living.
"Our forecasts are similar to what the Reserve Bank predicted in its May Monetary Policy Statement (in fact a little softer than the RBNZ’s view on labour costs). A result in line with our forecasts wouldn’t move the dial on what the RBNZ is likely to do at its 17 August review – we expect another 50 basis point lift in the OCR to 3.00%, with a signal of more hikes to come this year."
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87 Comments
I think the article represents excellent analysis. My only disagreement is about whether the RBNZ is currently doing the right thing by raising interest rates sharply. I think the OCR hikes may lead to a massive financial crisis, via credit crunch and housing price falls (already here), then credit defaults, then mass insolvencies and banking crisis.
The housing price index should be included in the consumer price index basket. This would signal strong deflationary danger currently, contradicting the high consumer price inflation and requiring the RBNZ to tread carefully regarding the OCR. Also, if we had had housing prices included in the inflation rate, the massive house price boom of 2009 to 2021 would have been mitigated, leaving everyone better off, especially first home buyers.
In any case, I am convinced we are in very dangerous territory now. Any further OCR hikes may trigger economic collapse.
Regarding the unemployment rate being very low currently, anecdotally, we are seeing an exodus of young skilled people going on a prolonged professional oversees experience. This may not yet be showing in the immigration/emigration statistics, due to their timing lag. This lag arises because immigration/emigration is merely estimated, with a mathematical model that attempts to exclude tourists from arrivals/departures, but tourism numbers have vastly changed with Covid and this is yet to flow through the model.
A German immigration advisor accredited with Immigration New Zealand told me anecdotally there is currently a large number of potential immigrants waiting to move to New Zealand but INZ's processing times have gone up to about 24 months, if I understand correctly. When I got my residence visa in 2012, it took only 7 months. Some major immigration policy change is scheduled to take effect today (31 July) but it remains to be seen what this will do. Many of my clients (medium size firms in New Zealand) tell me they are facing staff shortages.
In summary, I think our country is in danger of economic cardiac arrest. The official cash rate has been raised too aggressively, triggering housing market collapse. Immigration has been practically turned off whilst young people are leaving us (brain drain). Businesses are facing staff shortages and high rates of sickness in our highly vaccinated country. Whether this is seasonal or vaccine-related remains to be seen. After years of money printing, we are facing high consumer price inflation, combined with sharp house price falls.
I think a path of softening should be provided to prevent us from falling off the cliff: A reduced official cash rate combined with speedier immigration processing at INZ.
It would be extremely cynical of the RBNZ to introduce HPI into CPI after allowing prices to boom by not doing so for 30-odd years, while prices are still near their peak. It's akin to closing the stable door after the horse has bolted and saying 'look at the good I've just done!'.
But if at the same time they also introduced a DTI, and disallowed the practice of leveraging paper-equity as deposit, that would make such a move more palatable to the younger generations.
There is no need for more immigrants to prop the housing market up. All that will do is accelerate the rate of young skilled leaving, as they have no desire to pay large percentages of their after-tax incomes to enable the older land-owners to 'get ahead' at their expense. Though I expect to see that change once house prices and rents are back to more sensible levels - which is a long way below where we are currently.
You keep talking about "deflation", and "economic collapse". I'm sure it feels like "economic collapse" if you are overleveraged in property when rates are rising steeply, and values are falling - but that pain is localized. The inflation spike impacts every business and every consumer. History shows it needs to be tackled before it becomes ingrained.
Yes. Business is generally good. I think that raising the OCR further faster will depress inflation, improve the dollar rate and actually improve business revenues fot most productive businesses (the ones we need most) So it means raising it is far more beneficial to our economy than reducing it to help the few who took a risk and became overleveraged and may lose as a result of too much risk
Also the side benefits to society of a higher ocr are lower house prices and rental prices and lower costs generqlly leading to better skilled migrants being attracted due to improved affordability and less professional young nurses, doctors, engineers and teachers leaving
Yes inflation hits the poorest the worst and must be public enemy no: 1.
Sorry to say, the RBNZ will be hiking for some time......and big rates are coming.
If you cannot buy your porridge and potatoes at 7 to 9% interest rates with your current over-leveraged positions - make decisions now, while you can, without bank duress, to slash borrowings (SELL!) or get hit by the coming RBNZ train!
There has always been calls of "economic collapse"
"Oh think of the FHBs" "inflation is only imported increasing the OCR doesnt help"
Jerome powell and Orr should be very happy to let unemployment tick up a % or 2 than let the whole country suffer ever increasing inflation
I think you should deleverage now.
Markus - do you own a lot of property? (trying to get my head around the bias present in your views that you might be unconscious of).
Perhaps the HPI should have been in the CPI the last 10-20 years and mortgage rates would be at 10%....and house prices would still be around $400,000 average.
Making the changes now would lock in severe distortions into the market...we've made our bed and now is our time to sleep in it.
Paula Bennet has an opinion piece behind Herald paywall, asking why 105,000 kiwis are on job seeker, lots 18-25. Having just been in Queenstown where every window has a Help Wanted sign in it..... we should have no unemployment at all , if you do not want Hospo the ski fields need more bus drivers, jobs EVERYWHERE
The problem is the “jobs” in Queenstown don’t pay enough to actually live in there.
A family member worked for a company providing services across the lower south island. They could never find staff willing to be based in Queenstown, even when they were offered at additional stipend. The cost of living meant they were all better off being based in Ashburton, Invercargill etc
I lived in a hostel during my late teens, and it was fantastic.
But they're not suitable for everyone - with my family, I'd prefer a house or at the very least, an apartment. And most of those advertised for Queenstown-Lakes on Trademe (only 15x 3 bed+, mind) are over $800/week. Which is more than 50% of what a couple on $27/hour makes after tax at 40 hours each per week, and significantly more than your hostel.
“A fair few people, myself included, did not think including employment in the monetary policy mandate was a good idea.”
David, I totally agree with you on this. Congratulations on a great article.
I think you need to replace Liam Dann, NZ Herald’s chief economic reporter because you provide a range of opinion’s from leading experts. Liam gives his “expert” opinion but what expert economists support him.
Today he criticised former RBNZ Governor Graeme Wheeler & Dr Bryce Wilkinson for their paper about central bank failures.
Liam is a great supporter of employment & believes that the classic monetarist view is “political”.
Liam stated “when it comes to inflation, they hold a classical monetarist view… It is so embedded in the thinking of a generation that it is sometimes presented as an immutable law of physics. It isn’t. Like all economics, it is political… In my view, they often underplay the importance of employment in people’s lives.”
Liam justifies his stance by stating “But we haven’t left inflation unchecked. We are raising interest rates at an unprecedented rate.”
Liam states “Many of the central banks (and Government’s) harshest critics seem fearful that we are headed back to long-term stagflationary era of the 1970s and 1980s. These fears seem overly emotive to me.”
The editor at NZ Herald needs to question Liam’s bias and get him to back up his opinion with expert support. If anything it is Liam that is being political not those he criticises.
"Interest Rates will stay very Low for a very Long time."
-" a battle that is seeing it hike interest rates at a speed never seen before in New Zealand."
As The Prophet would always say - What the Vested Interest Say - Believe the Opposite !
7% Interest Rates This Year, Guaranteed.
Many "younger people" are very skilled, very much more that the boomer generation average.
Not sure what you mean by "ambition".
Given your involvment in the housing market I guess you mean owning your own house and having a RE porfolio.
Well... that is not about skills, at all. Is more about being born in a different time and different conditions.
But in a sense even being born smart is just a given...
Let's say that speaking about merits makes really little sense, when you zoom out
So we are going to have another house on the market :)
Anyways, I don't see vision and ambition in any country. That works at personal level, full stop. When you got vision and ambition then you look for good external conditions (free country, not too much govt, possibly peaceful, low crime, low or no corruption, cheap housing)
I would be curious in knowing your next stop.
You nailed it. And that is exactly the issue. NZ's leaders (and wanabe leaders) primary objective should be to create an environment that fosters opportunities for smart innovative people to come (or stay) and grow productive businesses in the medium to long term. If they aim for that everything else society needs will fall in to place
Right now their primary focus seem to be short term greed or centralised power for themselves and their donors.
RBNZ is crewed by its own doing and is now in " To Be or Not To Be" situation.
Either way are $@#% but if they act and control inflation and allow fundamentals to run than the pain, which is inevitable may be short term or if get cold feet and try to manipulate again by kicking the can, may delay further but the pain will be deeper and bigger.
There is a third objective, and one that is a precondition for the other two...
"Financial stability objective
(b)
the financial stability objective of protecting and promoting the stability of New Zealand’s financial system; and
Central bank objective
(c)
otherwise acting as New Zealand’s central bank in a way that furthers the purposes of this Act."
https://www.legislation.govt.nz/act/public/2021/0031/latest/LMS287017.h…
And the RBNZ; all Central Banks, created the very instability they were tasked with avoiding.
A combination of low unemployment, low interest rates, escalating CPI ratios and high debt has left only one narrowing avenue of escape. And continuing down the path they are on, is not it.
We can all take our pick of which of those variables are going to be targeted to return some sort of stability to the economy, but the one thing common to them all is the artificially depressed level of interest rates and the amount of debt in the system.
Let's just say, I disagree.
But it doesn't matter what I think. Only what is about to happen.
"(Central Banks) not only gave us the ultra-low interest rates with their unintended consequences in terms of The Everything Bubble, they also facilitated a misallocation of capital of epic proportions, they created an over-financialization of the economy and a rise in indebtedness. Putting all this together, they created and abetted an environment of low productivity growth.”
In a great previous article here it was noted that our RBNZ dropped ocr further than any other country. It was also noted that net migration here as a % was greater than for any other country (goverment issue .. but he govt and rbnz are well aware of each others actions)
The outcome was faster rising asset (house) prices than any other country.
And now because we have the biggest asset bubble the rbnz is reluctant to raise the ocr fast lest they damage the economy.
So .. yes it is directly the result of government and rbnz decisions that we cant confront inflation by raising rates faster and harder.
Now we have persistant inflation, an asset bubble and net migration out of key workers.... which was all foreseeable.
And we dont accept the answer that our children did something wrong because others were doing it already... so should we accept that from highly paid adults in a position of leadership and responsibilty. As with children consequences are inevitable and vital for our leaders - to ensure future highly paid public servants understand the likely outcome of poor decisions will be their legacy and reputations.
You misunderstand the context....consider the following.
Our four largest banks are offshore owned as is the liquidity they provide, we are a net importer to the tune of 20 billion pa and we like/demand access to all the world has to offer....if the RBNZ/Gov rowed against the tide (aka return opportunity for the international banks) and prevented them the opportunity available elsewhere, largely in a property bubble then would the current level of support for investment and the NZD have continued?....remembering this is a set of circumstances in place for the past 2 plus decades....the mistakes made during covid by the RBNZ have merely accentuated the existing problem....property values were 10x median incomes in Auckland prior to covid.
Unfortunately it is unlikely national will win. Even though the opportunity is being presented to them on a plate.
They are painting themselves as the very wealthy, elitist property investors that the rest of the country is blaming for the mess.
If labour simply points out this obvious truth, labours on 7house luxons foreign holidays, penchant to hell the rich and blames previous national govts for the current mess.. and shows enough images of luxon on beaches in hawaii whilst half of us live on 2 meals a day and holidays in the local park... it will be the preferred arguement
I'm noticing quite a narrative shift on the National Party Facebook page comments. While historically replies to their posts would typically command cheers from the one eyed brigade, lately there's been a whole lot of disdain and negativity.
It could be just an influx of Labour fans crowding the place, but if it's representative of general feels then there could be the potential for another term in opposition.
Systemic corruption (or endemic corruption) is corruption which is primarily due to the weaknesses of an organization or process. It can be contrasted with individual officials or agents who act corruptly within the system.
- Wikipedia.
This is corruption in plain sight.
The RBNZ is failing its mandate on inflation and failing its mandate on sustainable unemployment.
It refuses to halt the FLP, and is not sufficiently using its primary tool, which is the OCR.
The problem is that many property owners LIKE the corruption, because it benefits them. The big banks like the corruption.
Even David Hargreaves seems to like the corruption, because this whole article is essentially a lot of pearl-clutching and gasping "Oh! How terrible it would be if interest rates would rise! Won't somebody think of the asset owners!"
Everybody is hurt by inflation. But the people without real estate assets are being hurt the worst... they have not benefitted from 40%+ asset value gains in recent years. It is only self interested greed and systemic corruption that is keeping our OCR so low while inflation is so high.
And this self interested greed and corruption is likely to bite EVERYONE on the ass, if inflation gets further out of control. As a country we seem to be blinded to the dangers right now. EVERY indicator is screaming at us to say that inflation is becoming embedded. Look at Bank of Canada, they just made a 100 basis point OCR rise, with more to come. Orr is fiddling while Rome burns, and most journalists can't see beyond their own house values. Wake up and smell the coffee! Inflation is a bigger problem than protecting our stupid little housing bubble.
I think you are missing the other possibility that the RBNZ raise rates too quick and causes a recession and deflation. Then they will have to put them back down again, probably below 0. They really should take a slow and steady approach rather than the yo-yo approach. It’s not about protecting asset holders.
OK, so let's unpick this.
Why do you think that raising rates at, say, 100bp at a time is more likely to cause a recession than raising rates at 50bp at a time?
I would respectfully suggest that you think that because the idea has been seeded in your brain by the vested interest brigade.
We could study the facts. We could think about how OCR raises increase spending power for savers. We could think about how spiraling inflation is actually MORE dangerous for our economic well-being than falling asset prices. We could look to history, and especially the 1970s.
But as they say it is incredibly hard to convince a man of anything when his personal wealth depends on believing otherwise. We all have blind spots. Right now, all of our decision makers appear to be suffering from the same blind spots.
Consider this. Right now, everybody's spending power is being eroded by ~ 7% a year.
Is that not the seed of the Mother Of All Recessions? Depression, even, if it continues.
And we know from history that once a wage price spiral gets out of hand that inflation can become embedded and is extremely difficult to tame (e.g. 1970s).
The vested interest brigade would have you believe that inflation is easy to tame. It is not.
My spending power has increased due to pay increase and my main outgoing (mortgage) staying static (until next June at least). My debt has eroded by 7% (and the value of my house probably more so but that doesn’t worry me at all). So I think that is a big generalisation.
50bp is quite an unusually high rise, particularly multiple in a row, so they are already going quite fast. And it doesn’t really matter how fast as the market has priced in 4% OCR already.
personally I think they need to be very careful from here not to go too far, I think 50bp would be too high in the next review.
Correct this government shifted the goal posts years ago the same as they do with everything else. They just created more jobless categories so the number in job seeker dropped. Just another distortion so the data can be manipulated. Lets look at the actual facts, more people are homeless than ever before so true unemployment has got higher.
If they shifted the goal posts years ago you would have expected the unemployment rate to go down right then, not progressively over time. Let’s face it, whether it’s labours doing or a fluke, the unemployment rate is at a level not seen for a very long time, just ask almost any business which are trying to hire.
Oh look, here we go again with the rbnz having a problem managing employment and inflation. I hereby give them permission to just stop - no more monetary policy at all. We have markets for this stuff, which when combined with a 'no bailouts' policy, will adapt.
We have ended up with central planners trying to manage the economy!
Whenever the unemployment rate gets to where we are now, its is almost certainly followed by recession. Perhaps its just the business cycle theory playing out, perhaps its an overcooked economy, perhaps its the over aggressive response of central banks....
We can of course just change the definition of recession though and then pretend that such a thing no longer occurs! We can live in the world that Orwell was describing in 1984....let the Ministry of Truth decide that recession is just an opportunity of more wealth creation for the already wealthy by pumping up asset prices even higher!? Is this the world we are moving into?
Nobody's expecting to see the unemployment rate rise at this stage
Nobody apart from MSD and the Auckland University modellers that produce the unemployment nowcast? A nowcast that uses actual work and income data and a range of other sources to make an informed estimate based on a model that is built on more than reckons? Jeez, the last people I would ask about issues relating to real life are economists.
There might be some seasonal adjustments to be done, but I would be pretty confident of unemployment being static or notching up 10 points to 3.3%.
As for earnings, even if they are unchanged between March 2022 and June 2022, they will still show a 5% - 6% increase because last June was a low baseline. If anyone bothers to look at the data instead of the two data points used to calculate the annual increase, it is clear that earnings have been pretty flat since January, and previous surges were misleading because covid disrupted the data so much (earnings slumped in mid 2020 - creating a very low baseline for a few months, recovered strongly as people, errrm, went back to work, and are now settling back to where they would have been if Covid had never happened).
Get it done because...? What do you expect hiking rates to do other than reduce disposable incomes, crash consumer spending, increase unemployment and protect the savings of people with money? Will hiking rates reduce the price of petrol or diesel? Change the futures price of wheat? Break our supermarket or building supplies monopolies? Stop landlords hiking rents, or councils increases rates? Change the structure of our electricity market? Make insuring earthquake / flood prone homes cheaper? And spare me any reckons on 'protecting the NZD' - we are blowing in the wind of other currency movements.
When we start seeing car jackings in Auckland because a large group of people have given up trying to live on the scraps, maybe people will start to think differently about lobbying for austerity.
Do remember that a lot of commentators here are old and on pensions with savings, of course they want high interest rates, low inflation, and don’t really give a stuff about unemployment etc.
If they never raise rates then they can never lower them either (unless you believe in the negative rubbish). If they don’t get rates back up, what happens in the next GFC or Covid etc? Although I think they have gone far enough for now, time for a pause to see what happens.
It amuses me when people hint that others with a bit of money getting a break is not on. Especially on a financial website where I suppose everyone's end goal is to end up with a bit of money. Also amusing that everyone's end goal to end up with a bit of money at the moment they're doing their best to avoid money at all costs.
I am obviously aware of the interests of the interest readers. I enjoy the to and fro on here because commentators have thought about things I think about, and through debate and sharing links, everyone builds their knowledge and understanding.
Incidentally, I am pretty old and am winding down at work. I have pensions and assets that I am hoping will see me through my retirement. I guess I just don't want my retirement, or the world that my grandkids grow up in to be a hellhole ravaged by natural disasters and violent crime (both the result of the same societal negligence). Monetary policy creates instability and helps Govts to convince voters that they can't really influence economic outcomes as they, sadly, at the behest of the market.
Ahh Jimbo, I generally agree with your posts. But I find this one slightly offensive. I may be a bit old and have the means not to have to work but I have done my graft and I am still very concerned about the future. Whether rates go up or down is off no consequence to my personal well being so don't go making great assumptions of what others want.
Perhaps the best way out then is a monetary reset along the lines of the Australian New Liberals' party, rather than just more handouts to landowners and erosion of the value of work and savings. Erosion of the lot of those who work or rely on savings and transferring of wealth to those with land has already seen rising crime and more ready recruits for gangs as people drop out the bottom of housing-driven poverty.
Because of the huge dollar debt that many households have now currently being serviced with extraordinarily low interest rates. Doubling or tripling these rates will impoverish many of them. It also takes quite a bit of time for the effect of higher interest rates to filter into the economy so raising them too quickly and by too much is likely unnecessary, even foolish.
Turkey are another one at the moment, not raising rates because it isn’t popular. I think the RBNZ should do whatever they have to to curb inflation; however I think there is a good chance they already have, I don’t want them to go too far and cause the opposite problem and just have rates like a yo-yo, some stability would be nice and stability is the true mandate of the RBNZ.
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