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Statistics New Zealand says unemployment rate actually FELL to 4%, but the 'underutilisation' rate had a record climb, up to 12%, employment fell by 11,000 jobs and 37,000 people left the workforce

Statistics New Zealand says unemployment rate actually FELL to 4%, but the 'underutilisation' rate had a record climb, up to 12%, employment fell by 11,000 jobs and 37,000 people left the workforce

All over the place might be a good way of describing the latest unemployment figures released on Wednesday by Statistics New Zealand.

The disruptive impact of the March/April lockdown is all too clear, with a frankly nonsensical unemployment rate of 4% given, which is actually down on the 4.2% in the March quarter and is well below the 5.9% average pick of economists.

However, and its a huge however, what people should be looking at from these figures is the 'underutilisation' rate – a broader measure of spare capacity in the labour market – and hours worked. The underutilisation rate had a record climb up to 12% from 10.4% in the previous quarter, while hours worked fell by over 10% - also a record.

Kiwibank economists were right on the money with their headline reviewing the unemployment figures, which was: "Simply Unbelievable. Don’t judge a labour market by its unemployment rate".  

"It’s impossible to believe the unemployment rate fell during the greatest crisis since the great depression," they said.

"It didn’t."

They said the "actual" picture differs vastly from the unemployment rate, which suffered from people not being able to actively seek work during lockdown. "The underutilisation rate jumped, and total hours worked plunged, by record rates over the quarter."

ANZ senior economist Liz Kendall said the latest data "massively understate" the weakness that was prevailing in the labour market in the second quarter, due to measurement issues.

"Collection and allocation of responses to the household survey (HLFS) was complicated by lockdown, while impacts in the business survey (QES) were clouded by the wage subsidy," she said.

"...The headline unemployment rate from today’s release should be discounted, and there are some worrying trends that are starting to emerge that are only set to worsen.

"Temporary policy supports have delayed the impact of the current crisis on the labour market. But in many cases, job losses have been delayed and not avoided.

"The Covid-19 disruption seen over the June quarter has now passed, but the impact of the closed border and grim global outlook will weigh, with the crisis now morphing into an unfolding domestic recession that will have significant impacts. These will become more evident over time, particularly later this year, with the labour market tending to be a lagging indicator." 

Here's some of the additional detail from the Stats NZ figures:

  • Hours worked were down by over 10% – another record.
  • The number of people classified as "not in the labour force" rose 37,000
  • And the number of employed people fell 11,000.
  • The employment rate fell to 66.9% from 67.5%.
  • The labour force participation rate fell to 69.7% from a revised 70.5%.
  • Average ordinary time hourly earnings from the QES (quarterly employment survey) were up 3.0% annually, to $33.33.
  • Annual wage inflation from the LCI was 2.1%, for all industries and occupations combined.

Stats NZ's labour market and household statistics senior manager Sean Broughton said as the quarter progressed, and New Zealand moved through Covid-19 alert levels, the unemployment rate rose.

"In the earlier weeks of the quarter, when the country was in alert level 4, the unemployment rate was slightly less than 3%. Towards the end of the quarter, when alert level 1 was in place, the unemployment rate rose to nearly 5%. These rates have not been seasonally adjusted.

“....During the June 2020 quarter, some people weren’t actively seeking work due to the Covid-19 lockdown. Near the end of the quarter, the unemployment rate may have increased because more people sought work as New Zealand moved down the alert levels and restrictions were eased,” he said.

Westpac senior economist Michael Gordon said the critical factor to note from Wednesday's figures is that ‘unemployed’ is defined as those actively seeking work - "which wasn’t really a viable option under lockdown conditions".

"Indeed, Stats NZ showed that during the Level 4 lockdown in April the reported unemployment rate was just 2.7%, rising to 4.9% by the time the country had moved to Level 1. 

"Consequently, the broader underutilisation rate gives a better guide to what life was like under lockdown. This measure rose from 10.4% to 12.0%, the biggest increase since the series began in 2004. This measure captures those who would like a job but were not actively looking.

"It also captures those working part-time but would like to work more hours. A key aspect of employers’ response to the lockdown was to reduce hours and/or pay, an option that was supported by the wage subsidy scheme that was introduced in March. Hours paid fell by 3.4% for the quarter, while hours worked fell a hefty 10.3%. Under the wage subsidy, workers were still paid at least 80% of their previous weekly pay, but in many cases their hours would have been cut by more than that." 

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67 Comments

Low unemployment figures, bustling housing market, consumer spending healthy, domestic travel up, Sars2 elimination - there’s a lot of good news coming through!

32
up

Nice. Time to end the money handout bonanza then.

Heres my hot take on it; I think 14% of people with a mortgage asked for 6 months deferments. I personally know 4 couples that have asked for deferments, NONE of them are saving the money they no longer have to pay towards their mortgage (one has used as it an opportunity to go out on their own and start their business) So all that money that would otherwise be going into home loans repayments are being spent on booze, ciggys, eating out and other junk which will further be providing false figures.

I wonder how much money 14% of all mortgage repayments are in dollar value... gotta be a few hundred million right?

At the other end, I can confirm that some Boomer travel money is going into Home Renovations. I have put any second property purchase on the back burner as prices haven't dipped. I'm enhancing my home instead.

Ex Expat
"I have put any second property purchase on the back burner as prices haven't dipped."
I am in a similar position and agree regarding current situation regarding housing.
Everything including housing is currently seemingly holding up well but I think very, very fragile. I don't see borders opening for some time; fortunately it seems that domestic tourism will pick up some of the slack and job and business loss in that sector may not be as high as initially feared.
Rather than end of mortgage deferrals and wage subsidies, I see a community outbreak and second wave resulting in further lock down as per Melbourne and is likely to have significant effect on the economy, businesses, jobs and housing - and that is very high risk.
As for second property it is just a case of watching and waiting.

I know of a certain spa pool company that recently sold over 500 spas in a single weekend. Generally this market is booming. Same goes for residential pools, it is nuts out there.

Sluggy
Agree - very strange out there.
We look at the number on wage subsidies, mortgage deferrals and business support and one could clearly assume that vast numbers are in a dire position.
However, given the information on spa pools, new car sales booming, house renovators going gung busters, house prices firm etc . . . it would appear increasing likely that much of the government money and mortgage deferrals is not going on necessities but rather taking available money for discretionary spending.
But I suppose that what the government probably intended all along.

People preparing for next lockdown

pretty close to truth I feel. People got a shit load of cash up front in wages subsidies and also got to defer mortgages, plus all that money not spent abroad being spent in NZ, plus interest rate cuts, plus QE. So, huge sugar hit. But obviously this will dissipate soon as stimulus withdrawn. Price rises in housing market due to some of these factors, plus richer more likely to sell to get out of city suburbs. Plus low inventory. But inventory now starting to rise due to length of time stuff OTM and dropping new listings. Then unemployment comes through and demand for credit drops. The wave from lockdown pent up demand has crested. Now for the reversal

No individual should be receiving more money than their normal pay as a result of the wage subsidies. Businesses do get it as a lump sum, but I think they'd be foolhardy to splash that on spending instead of keeping it in the bank until they needed it.

Similar to my suspicions, people taking mortgage holiday who don’t need it and unaware of the true cost of it.

Just ballparked it, the $38b that's on holiday or interest only would normally generate $100million a month in interest payments, and I'll guess about the same in principal repayments. So about $150m a month that's no longer flowing to mortgage payments..

Of the two that I know, one has bought a new motorbike, one is saving. I would suggest there are quite a few saving for a rainy day as evidenced by the increase in deposits as reported by the RBNZ.

19
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Haha.... manipulated figures. You can only hide the truth for so long, ask Bindi !

Who's Bindi?

His accountant.

Bindi Norwell, the CEO of Real Estate Institute NZ. Patron saint of property spruikers.

16
up

Lies lies and damned statistics.

Interesting to see 'not in the labour force' rise, I can't see any reason someone who was unemployed as a result of lockdown fitting in this category as they'd forgo the higher unemployment benefit being offered.

Might this number be made up primarily of people who were unemployed & searching for work before Covid dropping out of the workforce due to worsening economic conditions (and thus job opportunities?)

These are just people who are not actively looking. They may well be just too discouraged to look.

That figure of 1.2m people 'not in the labour force' contains a lot of people who should be employed but aren't.

It would include parents who have to stay home to look after their children during lockdown.

are the people not in the labour force those on work permits that don't qualify for support?
if so then we have a heap of people here that need help to get home

18
up

"Sir John Key, who is chairman of ANZ bank, said in New Zealand about a quarter of all its customers had experienced a 20 per cent or more reduction in their income due to Covid-19.
About 10 per cent had their income reduced to zero."

But wait! He has the answer, and here it is....
"He said universities should be allowed to bring in international students and the Government should lift a ban on foreign buyers."
(Where is that picture of him and Xi cosying up. Just coincidental as a private citizen, of course)

I believe Xi more than Key so this means nothing to me.

18
up

He really has no shame..or are the CCP supplying him pony tails?

14
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Thank goodness he resigned, for, er, 'family reasons'...

10
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Immigration and house sales to overseas buyers. National's ideas on how to run and economy there.

29
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We are an exceptionally smart and amazing country - the world should follow our example of economic brilliance. We need to continually have house prices doubling every ten years as this is the most important economic driver. We have shown the world how to build a prosperous country through house trading between citizens. Time to rewrite the economic textbooks and focus on housing as the key driver of economic wealth. A new golden age is upon us.

I got so into the groove of your post I read "prosperous" as "preposterous" without even noticing. Nice work.

Everything is rosy! No need for the wage subsidy then, ditch it now

It looks like our economy is doing pretty well despite it's hitting by Covid 19, but why the stock market is still looking bad at the moment? Surely something is not right here.

Stocks seem to be doing well to me. NZX50 is near all time highs, and NASDAQ is at all time highs.

We have a job posting at the moment. Last time we advertised for it about a year ago we had 40 people apply. This time we are tracking to have 400. Yup, economy is amazing currently.

Stat NZ becoming part of the conspiracy, cooking the books 101!

Shurely this is a 'rogue poll'. Or is it a Rouge Pole? Sigh. Sooo confusing.

Old joke - ‘Why are there no gays in Poland?’

- Because like Poles repel

So we lost 11k jobs out of a labour force of roughly 2.8 million. That should be a 0.4% percent rise in unemployment.
Edit: none of the original numbers were correct.
Generalising it looks like 5% of the unemployed gave up looking and none of returnees and people recently turned 15 have found a job.

As ANZ income drop stats show, people had less income from work done: ie hours reduced or contracts re-written. This reduces consumer demand.
Government removing stimulus in 3 weeks time.

There's almost all negative numbers in the report, if you look beyond the headline figure (but the figures bullshit). I think most of missing number have been funnelled into further education so they won't show up unemployment.

With a 70k increase in those on Jobseeker benefit/Covid benefit?

Just checked in to rent another car for a month. Business back to pre Covid levels and revenue wise better year on year. This is is local NZ outfit and staff are smiling. All that Ozi, and Pacific Island dosh currently being spent here.

Not so good for the rental car company I have recently hired a car through, had 9 days in the south island, hired a car from ChCh, they told me at this time of the year they would normally hire 60 cars daily, now lucky if they do 10. They have layed off 1/3 of their staff at this stage.

The unemployment rate has always been a non nonsensical metric.

Yep I agree, the way they measure it is totally incorrect IMHO. It makes it look like virtually everyone is employed. When they are not.

The official unemployment rate measures the average unemployment rate during each quarter, rather than the unemployment rate at the end of the quarter.

Stats NZ estimated unemployment had risen to 6.2 per cent during the final week of June, but it said that weekly figure was based on a small interview sample of just 500 people.

official-unemployment-falls-to-4-in-june-quarter-but-banks-warn-it-wont-last

One of the "benefits" of measuring unemployment every three months I guess. When will those silly Aussies, who measure every month, learn?

How much PAYE did the IRD collect month by month Jan-July this year. How many individual taxpayers had PAYE paid in their name in those same months? The IRD would have those numbers available almost instantly one would hope. They would tell a real story.

The IRD would have those numbers available almost instantly one would hope.

Yes, but you need to implement a real-time, tech-based platform to effectively gather, process and use the data. This is the NZ public sector, not an organization that needs innovation to succeed.

So the IRD's 1.8 billion dollar Business Transformation Project was a waste of money then?

I wasn't aware. Who did this? KPMG or one of the other beneficiaries?

I guess it was.
I got a letter demanding some money for a penalty.
The letter did not explain what the penalty was for neither did the reason exist anywhere with in MyIR.
It took half an hour on the phone to get an explaination - underpayment of provisional tax.

They are making heaps of errors. I kept getting letters demanding payment for a penalty, so I paid it, only to receive another letter demanding an explanation for the extra payment. At that stage I gave up and enlisted the accountant who found it was all IRD error. He said to ignore all messages of unpaid amounts for at least two months as they are usually erroneous and will sort themselves out.

An absolute tyre fire. Government managers love hiring the big guns like IBM, HP, KPMG, etc. to deliver these steaming piles. They know they're going to be expensive and not fit for purpose, but you can't get a bad name as a manager for hiring the big boys. God forbid they should back themselves with a team of local experts who know the inherent problems of the business and could potentially solve them. Unfortunately that comes with a high amount of perceived risk and ACCOUNTABILITY. The amount of arse covering that takes precedence over good governance is criminal.

Westie, all the numbers will come out after the election....

We know few people were laid off because the wage subsidy has been in full flow. We equally know some businesses have hired to keep up with business.

The music simply hasn't stopped yet.

Yep, this is exactly what I was thinking of. I just saw your comment after I posted mine.
Of course the economy is (seemingly) doing great if the govt fills every hole with dollar bills, and then some more.

A possible explanation of the decrease in unemployment rate is that the normal flow of hiring and firing employees has been interrupted by the subsidies. Why get rid of an employee when the govt pays their wages?

Re the unemployment figures just released, I know of a situation where a couple both had jobs, she has lost hers, due to his income she can't get any financial support so she won't show up in the unemployment stats.

Say you were a business with 100 minimum wage employees at the time lockdown hit. All of them on flexible contracts averaging 20 hours or more. You could claim full whack subsidy for all of them 58 grand a week. Then if due to covid19 your business is still open but "slow" you can give them all 20hrs work a week only. That would cost you 39K. You would be ahead by 19k per week. 247k over 3 months. You could use that surplus to keep the owners, managers etc on full pay or maybe even give them a pay rise. Otherwise, you would be obliged to pay the money back.

Sorry but sometimes you just cannot trust the numbers. In case you missed it its election time next month so everything has to have a positive spin on it at this stage so the can gets kicked down the road another couple of months. If things are so great why is there talk about extensions of the wage and mortgage holidays ? in fact now we are essentially Covid free and its supposedly business as usual is it not time the subsidies all stopped ? kind of mixed messages don't you think ?

Australia seems to be different?
Comments from some of those about to find out what it's like to live without the Wage Subsidy (ends September):

"The few recruiters and agencies I have spoken to have asked me point-blank to cut my rates and salary expectations up to as much as 50%. Financial insecurity, loss of identity and no job prospects on the immediate horizon."

"I have worked in IT for over 25 years. Since losing my job I’ve applied for literally hundreds upon hundreds of jobs at all levels, just to try to get anything. I have not had one single callback, let alone an interview.
I am beginning to learn that my industry seems to want someone who is 30 with 15 years’ experience, not someone who is over 45 with 25."

"Since my job loss, I have been relentlessly searching for work. It’s really challenging because when you look at Seek and a position you applied for is filled, it shows you how many people applied for the position. I’ve seen as high as 750 applicants for one position."

"I was employed by a law firm and let go at the beginning of the pandemic.
I’ve applied for numerous jobs. The job service provider now wants me to complete a security guard course at government expense so I can get some work doing crowd control. I have no choice."

You don't make it clear whether these are people in NZ or Australia?

Very interesting. Traffic busier in the morning than pre lockdown.
First wave didn't do enough damage, they are talking about second wave today..

Everyone is struggling to cope with the fact that things are not as abysmal as expected. Also many, employees, businesses and banks like to paint a worse than actual picture of the future in the hope of getting more free money from the government and sadly, the government will probably oblige

Here's some stats from today to show everyone how close to the edge we are:
- There are 452,000 New Zealanders on wage subsidies.
- Despite this, in the last quarter, the number of people not in the workforce rose by 37,000.
- the number of employed people fell 11,000.
- hours worked fell a record 10.3 percent.

The total number of hours actually worked in the June 2020 quarter fell 9.3 million hours (10.3 percent) compared with last quarter and decreased 8.2 million hours (9.1 percent) compared with a year ago. These were the largest decreases recorded since the series began in 1986.

I havent yet seen any stats on how many folks have taken a pay cut but I have heard of many cases.

A thought.

Wage subsidy more than benefit.
Wage subsidy open to new companies.
Wage subsidy open to new employees.
Wage subsidy extends past June

I wonder how many "New" companies and employees came into existence in the same period.

I wonder how many of these took up the wage subsidy.

I wonder how many will be around after the subsidy ends.

I would believe it in the regions at least, things are looking dire for the agricultural contracting industry as many companies are severely short staffed and can’t get any suitable applicants interested in driving a tractor or truck, even with some advertising that no experience is required.
Some companies have less than half of their normal staff and are not sure what they are going to do now with the busy season fast approaching.
Job vacancies on Trademe are also increasing steadily, up from about 14,000 a few weeks ago to nearly 16,000 today.

Days to the General Election: 19
See Party Policies here. Party Lists here.