Statistics New Zealand says unemployment dropped to 4.9% in the December quarter from 5.3%; economists had universally expected unemployment to rise

Statistics New Zealand says unemployment dropped to 4.9% in the December quarter from 5.3%; economists had universally expected unemployment to rise

Unemployment has confounded all expectations again - by dropping to 4.9% in the December quarter.

The fall, Statistics New Zealand says, followed the highest ever quarterly rise (to 5.3%) in the September quarter.

Economists had universally expected that the unemployment number would rise again in the December quarter, with most economists picking a figure of 5.6% - which is what the Reserve Bank was picking.

The latest figure may well end any talk of further drops by the RBNZ in official interest rates. Indeed, ANZ economists (who had forecast a further reduction in the Official Cash Rate from 0.25% to 0.1%) reacted to the unemployment news by saying they no longer expected further rate reductions.

The dollar rose by about quarter of a cent, to US71.9c on the news.

The reaction to the latest figures was predictably one of enormous surprise.

ASB senior economist Mike Jones: "We’d suggested the risk was for a stronger set of labour market indicators today, but we were nonetheless left gob-smacked at just how strong the labour market in Q4 proved to be. Unemployment not only fell, but fell a long way, from 5.3% to 4.9%% - well below our and market expectations of an increase to 5.6%. This was thanks to a stronger-than-expected 0.6% lift in jobs growth, above our (+0.1%) and market (-0.1%) expectations. Labour supply ticked up about as much as expected; the participation rate nudged up to 70.2%."

Kiwibank chief economist Jarrod Kerr: "...Today’s report was truly remarkable.

"... A 4.9% unemployment rate is a remarkable result, considering the earlier estimations of a move towards 10%. Provided we make our way through 2021 without any major lockdowns, or economic disruptions, we’re firmly fixated on the light at the end of the Covid tunnel. Statistics on Covid cases will (hopefully) be overwhelmed by statistics on Covid vaccinations. And, all going well, the Kiwi economy should record a solid 3-4% growth rate this year."

Westpac senior economist Michael Gordon: "This surprise will be very important for the Reserve Bank. The surging housing market, surprisingly high inflation, and now falling unemployment all make it obvious that the combined efforts of the Government and Reserve Bank to support the economy through the Covid shock have had a much more powerful effect than anticipated. This will call into question just how much ongoing stimulus, particularly over the period when the Covid vaccine is rolled out and global travel resumes."

The Government was quietly satisfied. Finance Minister Grant Robertson: "The Government’s decisive actions to keep people connected to their jobs and support businesses and households through the COVID-19 pandemic has been reflected in today’s positive numbers.

"Confidence in the Government’s handling of the economy has also been reflected in recent business surveys, with firms intending to hire more staff."

Stats NZ said the increased number of jobs in the construction industry offsets losses in media and tourism related industries over 2020.

“Although overall employment is similar to a year ago, looking at movements by industry shows how New Zealand jobs have changed in response to COVID-19 and its restrictions,” labour market manager Andrew Neal said.

Nationally, the household labour force survey (HLFS) showed an annual increase of 21,000 people whose main job was in the construction industry, up to 278,300 people in the December 2020 quarter. Of this increase, 15,200 were men and 5,800 were women.

The seasonally adjusted number of unemployed people fell by 10,000 in the December 2020 quarter, to 141,000. The decrease was split evenly between men and women – the number for both fell by 5,000.

Despite this quarterly fall, the number of unemployed people is still 25,000 higher than it was a year ago, increasing from 116,000 in the December 2019 quarter (a rise of 21.9 percent). The annual increase was 15,000 for women and 11,000 for men.

The number of people not in the labour force (NILF) fell by 3,000 over the quarter.

The seasonally adjusted number of employed people rose by 17,000 over the December 2020 quarter. This follows falls in the previous two quarters of the household labour force survey (HLFS), by 7,000 in the June 2020 quarter, and 19,000 in the September 2020 quarter.

Feelings of job security have improved since the September 2020 quarter, with 79.1% of people in December 2020 quarter saying there was almost no chance or a low chance that they would lose their job or business in the next 12 months, compared with 74.3% in the previous quarter.

Since the December 2019 quarter, the number of seasonally adjusted employed people had a small increase of 19,000 (0.7%). This annual growth is lower than seen in recent pre-Covid years.

The employment rate was 66.8% in the December 2020 quarter, compared with 66.4% in the September 2020 quarter, and 67.6% in December 2019 quarter.

Although the employment rate is lower than a year ago, New Zealand currently has the fifth highest employment rate amongst 15–64-year-olds of all the OECD countries.

In the year to the December 2020 quarter, average ordinary time hourly earnings increased to $34.14 (up 4.2%) as gross pay rose more sharply than paid hours.

The labour cost index (LCI) salary and wage rates (including overtime) increased 1.6% in the year to the December 2020 quarter, while unadjusted LCI increased 2.5%.

The LCI is often compared with the consumers price index (CPI) to see how wage inflation compares with consumer inflation (the change in prices of goods and services bought by households). Annual CPI inflation was 1.4% in the year to December 2020.

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94 Comments

Economists aye...do they ever get it right? I guess RBNZ's magic tricks are hard to decipher.

Maybe it's time to take away the pedestal they seem to enjoy, Turns out they can probably do better at forecasting the weather!

Jobs for all in the land of milk and honey!

TTP

To be fair, the "magic tricks" are done in response to the predictions. It's like someone warning you that your toddler is about to run onto the road. You quickly pick up your kid, then scold the guy who warned you because he was clearly wrong?

Here we go yet again . . .
Nifty1, morphyoss, demonstrating an ignorance of the nature of economic forecasting.

Here we go again, an angry boomer with a bone to pick. What's not understood? Economists are proven wrong again with their predictions.

Keep digging that hole Nifty
:)

34
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Is this what happens when the borders are closed and competition for jobs from new arrivals falls?

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Building construction, for instance, saw strong growth in both jobs and average wages as firms expanded.

This comes after years of NZ National claiming that bringing tens of thousands of random migrants and hoping some of them know how to work with tools was the only way we could build more.

14
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Might actually be a double whammy:
1. No migrants and far fewer tourists, so less demand on tourism, so people in the tourism industry change to the construction industry
2. No migrants taking up housing spaces

26
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An example in action:

Competition for vintage staff in Marlborough is fierce a few weeks out from harvest, with some workers making the most of their new-found negotiating power.
Seasonal staff in New Zealand’s wine capital are weighing up their options like never before, as closed borders due to the coronavirus pandemic mean the industry is scrambling for workers.

Wage demands of seasonal staff causes trouble at the tanks ahead of wine harvest

Although why Stuff labels wage growth as a source of trouble is perplexing. Wage growth = trouble, house price growth = celebration is a pretty standard media narrative.

Excellent - about time!

Global phenomenon. Amazing what happens when the natural laws of economics are allowed to apply.
https://www.abc.net.au/news/2021-01-31/farmers-paying-higher-wages-attra...

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Sounds like New Zealand should create a trickle system for immigration, a lower population will help the countries carbon dioxide emissions as well.

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This is what I don't get. Every drop in a NZers standard of living in order to eke out a few gains in carbon emissions, is immediately made irrelevant by importing new humans who create even more carbon emissions, necessitating further reductions in our standard of living to offset them, and so on in an ever repeating cycle.

Around 12 months ago on the announcement of the lockdown many contributors here predicted an outpouring of unemployed onto the streets and other dire messages such as untold suicides resulting therefrom. Thank goodness didn’t eventuate then. If nothing else has proven NZ & NZrs to be more resilient, resolved, independent and adaptable than probably previously recognised. Well done team of 5mill then?

Yes... we mainly did what we were told and the tool was blunt. The outcome could also be down to (1) isolated island nation (2) low population density (3) good luck etc..

Now anyone with half a brain can also see there are consequences from said action that are yet to manifest that many may find distasteful! (Unaffordable housing [ownership and rent], homelessness increases, crime and drug abuse increases, disenfranchisement and tension leading to more protests, lower productivity and higher consumer inflation from zombification of business [re tourism want sustenance longer now] etc...)

ML smith ,you sir are a sad man,woman,or child.

Free market economists should practice what they preach.
Economists and weather forecasters should only be paid after they get it right. I suspect that there would be a vast improvement in results with both professions.
I forgot to include witchdoctors.

Except the 'economy' can be controlled more easily than the weather. If the weather forecast tells you that it's gonna be raining on your wedding day but you have the power to postpone the rain by a day or two, would you not do it?

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Good news. It is high time now to raise interest rates, slowly and moderately; they have been too dangerously low for too long. Time to wind back some of the emergency settings, currently at levels that are only justified in an extreme situation.

...that'll never, ever, ever happen again in our life time. They'll have to go down (negative) in the coming years, it's the only way up for western low (no) productive, outsourced economies.

Negative retail rates don't really work though, because people can keep their cash in physical form, or just buy things instead (like houses or precious metals).

If inflation rate goes up. the interest rate will have to go up. As global pandemic continues, supply shortage could happen, transportation cost can go up too. Apparently there is a new e484k convid variant has been discovered, which may impact vaccine effectiveness. It's still unclear how long this will last and what is going to happen in future.

No interest rates don’t need to go up. They have alternate options, one being to control the availability of credit. This is the more likely choice.

The banks will suffer more if RBNZ uses that option. It might make our economy even more fragile.

Inflation won't be going up. They will obfuscate the data to make it stay within the 2-3% band even though we all know things have gotten more expensive. Practically no country can now afford to put interest rates without destroying their banking systems. Look at what happened the last time the US Fed tried it (meltdown in the repo market). Just imagine the catastrophe that will happen if all those home buyers in NZ face their mortgage payments going up by 50%.

It really is *not* the time to raise interest rates. An increase in interest rates will *increase* the risk of inflation - not reduce it. As today's news shows, old school economists do not have enough understanding of how things actually work in the real world to make forecasts or guide policy. Just think what an increase in interest rates will actually mean - people and businesses holding financial assets will earn more money (inflationary), forward pricing will go up (inflationary), and, years of empirical evidence suggests that higher rates will *weaken* the currency (inflationary).

Behind the recommendation to increase interest rates is the mind-numbingly stupid assumption that businesses choose whether to borrow and invest based on whether interest rates are a few per cent higher or lower. Madness.

Not sure where you get your economics from - but none of the above occurs when interest rates rise.

1. Savings are the main beneficiary of increased interest rates - not debt assets - with assets funded by debt - costs of having the debt goes up so the price of the asset declines

2. higher rates - strengthen the currency as overseas investors put their money ie Savings where they get the higher return - which would be in NZ banks- they buy NZD in order to be able to do this - strengthening the currency

3. Imports decline in value as the Currency appreciates so a $100 USD item will cost $140 when the kiwi dollar is at at 70 c and $120 when the dollar is at 80c.

Leaving interest rates too low in an overheating economy will cause a recession as a wage price spiral occurs and the costs of labour outweigh the cost that producers can reasonably charge for domestic goods

I recognise these points from the textbooks, but there is very little empirical evidence that any of this actually happens in real life - in fact it is more often the opposite. The trouble is that a lot of these confidently stated conclusions are based on the Quantity Theory of Money and some outlandishly unrealistic assumptions (e.g. constant velocity of money). The economy is a complex system with many moving parts - assuming that pulling one lever (interest rates) will lead to a change in 'inflation' is dumb. Look at NZ interest rate vs CPI between 1997 and 2008 (GFC) and you will see a clear *positive* correlation.

Market interest rates are necessary to ensure the efficient allocation of capital - into the productive economy. So long as these low rates endure malinvestment will continue. Ie into property and other non productive safe havens.

Our central bank morons don’t see to have worked this one out....or they have and are following the directive to make the rich richer.

Key word is market... that is without asymmetric dominance of central banks destroying natural outcome of the market - finding ‘market price’.

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Unemployment goes up: Damn you Labour with your incompetence.

Unemployment goes down: Has nothing to do with Government.

Yes this will be making the sausage rolls taste extra bitter at the National Party's retreat.

I think this article has aged really well

National would set a target to get unemployment down to 4% by 2025 (October 2020)
https://www.rnz.co.nz/news/political/427682/national-would-set-a-target-...

Turns out, National had no plan just a slogan.

No surprise really when they got a hiding in the election. Lining up that way in 2023 too.

Disingenuous, increasing unemployment wasn't Labours fault it was a global pandemic. Similarly very high house prices weren't a Labour issue until they campaigned on increasing housing supply and establishing a defined KiwiBuild program.

You mean de-campaigned.

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Cool. Now explain why lawyers and accountants are on the skills shortage list while I'm expected to pay back a student loan in a market that can't seek new equilibrium to lift wages, and pay packets fall further and further behind Australia.

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Those skill shortages are lies propagated by professional firms to keep their wage bill low and supported by universities making big money from shoddy accounting and law courses.

Entry-level jobs in these professions are offered by but a handful of firms across the country at very low salaries (48k-55k a year) and are hotly contested by local graduates and older, experienced migrants.

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Too right - not to mention that salary range also assumes they work 40 hour weeks. In all honestly its probably almost double that at no extra compensation. Many probably will actually pay below minimum wage if it was properly investigated.

You signed up for it. Pay it back.

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I sure did. And guess what? I'm paying it back from a lower starting point, on lower wages and with higher living costs and at a higher rate than I would if I was an Australian with an Australian student loan. As far as I'm concerned, the deal was I'll take on the student loan in exchange for a stable, middle-class professional job that I'd been told for most of my life would give a shot at a comfortable lifestyle and give me the financial headroom to start a family. I'm not the one who isn't upholding my end of the deal, perhaps your sanctimony is better directed elsewhere.

Shoul've invested that loan into property instead. The country doesn't need workers, we'll do just fine flipping houses to each other. The perpetuum mobile has been invented by none other than bank economists! Who woulda thought...

Should NZ then merge into Australia? So much more advantageous over there, why not cash in? Personally I find Australia and Australians in general rather good, would be no problem at all.

Not with their corruption. Behaviour of Scot Morrison appalling as he tries to crush Aus Post to game favours with the big banks. This guy is a disgrace.

https://citizensparty.org.au/scott-morrison-should-resign-not-christine-...

But you're not an Australian with an Australian student loan and presumably you weren't before you started studying either.

Another excellent post pointing out something that again, I am already aware of. You lads are on fire today.

GV 27 I enjoy and agree with many of your posts but that earlier one just sounded like a whinge. Interest-free student loans in NZ are a great deal. Why compare with Australia? There are almost 200 other countries you could have chosen, most of which don't provide any student loans at all.

How many of those countries are two and a half hours by plane, pay higher wages, speak the same language and have many of the same stores and sporting leagues that we do? Nah, let's compare our student loan system to... Somalia? Mongolia? Definitely going to have more relevance than the country that already has 600,000 Kiwis living in it!

GV27,

At 75 and long retired, i am at the other end of the spectrum from you, but in general you have my sympathy. It cannot be easy to be burdened with a student loan-not required in my day-and facing a rapidly changing world of employment.
However, while you can easily go to Australia and by the sound of it that seems likely, you must know that should anything go wrong, you would get little help from the government. I wish you well.

Student loans backed by govt = a University system with Nil incentive to reduce costs and innovate learning.
The loans system provides a gravvy chain of customers with guaranteed ability to pay.
And the proof of the pudding is the crazy levels of debt taken on by the naïve, ever rising fees and skills shortages to boot.
If you want a snapshot as how learning should have developed take a look at the kahn Academy - free online and all the education most of us will ever need to educate ourselves.

Wages rising more than inflation eh.
So, more inflation then.
Economy on all cylinders though.

Very good news.
So the two main mandates the RBNZ has to achieve, inflation and unemployment have both considerably overshot the RB's expectation. Will the RB therefore adjust their loose monetary policy settings? If they are consistent, they have to

As housing is our economy now better not to tempt fate. Just pull the additional stimulus like FLP and reverse LSAP.

That would be great!

NO more interest rate cuts
So, no more fuel for the Ponzi.
Out of bullets.
We will now see how my forecast pans out from mid February

Even a hint of an interest rate rise would set off a collapse in the house of cards ponzi ...the gear shift is stuck and dam the consequences.

Oh I see, your forecast of house price drops made in Sept 2019 for upcoming February was actually meant for February 2021 LOL

To be fair at least he has a crack - nobody saw the RB crapping the pot

You watch. They will borrow from the US and change their mandate to say they will happily let the economy run hot for a while.

borrow from the US? We spend NZ Dollars in NZ which only the NZ Government has the Authority to issue.

Sorry. you misunderstand my point. I meant borrow from Jay Powell''s playbook. he is letting the economy run above inflation target if it happens.

I Understand your meaning now.

I think he means borrow the idea of allowing inflation to overshoot

Well if you follow the trend they should be able to work out how much more QE and how tight a lockdown and Covid infection rate we need to get full employment.

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So it's official that international tourism has very little benefit for the economy. There's no need to put up with the congestion and overcrowding, the carbon emissions and Air b-n-b putting pressure on the housing market.

21
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Same goes for export education I suppose. The sector needs to focus on high-value candidates in study areas where local throughput is low (medical, post-grad engineering, etc.). Outside of this cohort, the sector is simply a get-rich-quick scheme for worthless PTEs and slumlords.

Our future prosperity clearly lies in training more locals in tech and trades and importing fewer business graduates.

17
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We have no shortage of smart high school graduates who want to train in medicine. The bottleneck is spaces in medical school, and placements after that.
Our whole tertiary education model could be overhauled, streamlined, and produce a lot more talented graduates at a lower cost if there weren't so much inertia in the sector.

The Medicos are completely holding the country to ransom by the grip that they have of on the medical schools and specialist training system.
They are the most powerful unchecked union in the country.

60% of medical students get in to medical school based on race not on talent. Even if there were more spaces available it would be likely that they would be filled with more race based selections and not merit based ones. We don't produce talented graduates because we are more concerned with "cultural equality" rather than producing people with the skills to cure cancer or be world leading surgeons.

Where did that figure come from?

It's much cheaper for us to keep stealing them from third world countries and let them carry the cost of training. We are heading for a crisis in having enough GPs and the government is doing nothing about it.

I would only take this as a read on employment, not the overall economy.

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Yes, this.
The international tourism sector, especially in Queenstown, is international tourists being served by foreign workers, making a profit for overseas companies. Hence there being no effect on the economy when it disappears. The workers go to other workplaces such as seasonal horticulture and viticulture.
The lack of freedom campers hasn't brought the economy to it's knees either.

When I visited Queenstown in winter 9/10 unskilled workers I talked to were clearly foreigners. And I played the guess where you come from game with many just to verify it.

66.8% of New Zealanders aged 18-64 were employed (getting paid to work) in the December 2020 quarter.
352,000 of them wanted to work/earn more. So the other 33.2% were ?
Tell us how much PAYE was collected December 2020 vs December 2019. That is a real number.

Half of the 33.2% will be stay at home mums. A quarter will be students. The last quarter are drug addicts, dole bludgers etc.

You have to look at how many people are short term unemployed (i.e. typically just transiting jobs) v.s. long term unemployment. That's why the tag of unemployment often isn't that helpful.

Donny11,another sad man ,woman or child.

How nice of you to consider the disabled who make up most of those out of work as drug addicts (which they are not) and dole bludgers (which the dole does not exist). Here is a clue most disabled job seekers only 1/4 will find an employer to hire them, many for only $3/hr (that is how much they want work they will work for $3/hr, would you?). Many will be told after the first couple hundred of applications to give up and many struggle to just stay alive at all. If you were likely to die before 30 and you needed help to get food cooked and bathing, and have been told by over a hundred rejections that no one would employ you what would you do? Some parents are so dismayed by this they have gone out of their way to provide a company and funding for kids but most families with disabilities don't even have enough for adequate housing and transport. Way to go on the discrimination calling them drug addicts and dole bludgers. Remind me to do the same when you are crippled, and about to die.

Even the underemployed numbers were down, which was the main flaw the headline could have disguised. The total number of people not in the labour force fell - but was it retirement, or was it giving up? Either way, only 3K change

Where's the stats though? Looks like https://www.stats.govt.nz/indicators/underutilisation-rate hasn't been updated yet while employment, and unemployment figures have. With the RBNZ also delaying their economic data due to "being hacked" something seems a bit off.

// edit - scrub that I see it in the report on the home page https://www.stats.govt.nz/news/unemployment-drops-to-4-9-percent-as-empl...

Or was it getting on a plane to Australia?

This could get ugly for the RBNZ and new home buyers very quickly.

If unemployment continues to fall - it will lead to an increase in inflation (especially with the minimum wage changes kicking in in April). The RBNZ will then be forced to lift interest rates to stop the economy overheating (which is suspect is already occurring)

The increased interest rates are likely to kick in in the last qtr of 2021 - just in time for all those new home owners 12 month fixed terms to expire. The lift in mortgage repayments combined with inflation on everyday goods and services will make it tough for those households who have overextended themselves to buy a house.

Add in all the new housing coming onstream (record approvals since Sept) - for property investors it will be tough to lift rents with more rental supply and for the overextended hard to sell in a flattening housing market. Then add in the fact any people who bought in late 2020 did so with minimum deposits and there is a real risk of negative equity for a number of households.

One should always be careful for what they wish for- Orr has obviously flooded the market with Stimulus and no deposits to avoid a house crash and he might get one anyway.

Nothing that a healthy dose of mass immigration/student catch-up won't solve.
That's been the only plan for 40 odd years, so why would it change now?
The Virus? At some stage, no matter what the possible outcome, we are all going to have to get used to living with it.

its great news -- but nothing a 6 week L3 or L4 covid lockdown would not destroy in a heartbeat - Above all else -- protecting our borders from COVID needs to be the number one priority!

So why was all those stimulation measures necessary and all the house price heart ache that followed.
It is one thing to be mistaken in the first place, but to blindly plough on down the same path without correcting the error is plain stupid.

Personally I no longer believe any figures released by governments. You can tweak anything to make it look the way you want it, just change the measurement parameters. The unemployment figures have always been wrong anyway, trying getting a benefit if your partner is still working for starters. Try getting the benefit if you have saved to cover yourself in case you loose your job.

Unemployment benefits are administered by MSD and the unemployment rate is measured by a survey Statistics NZ does every 3 months. There is some over-lap, but not always.

- Qualification for an unemployment benefit doesn't necessarily mean you will be counted as unemployed (you could be working 1 hour a week for example, and counted as employed by Stats NZ, but your main source of income will be a benefit).

- Being denied a benefit doesn't mean you will be left out of Stats NZ representative survey.

The real statistics. "12.4 percent of the estimated New Zealand working-age population received a main benefit as at 22 January. 6.8 percent received Jobseeker Support as at 22 January."
https://www.msd.govt.nz/documents/about-msd-and-our-work/publications-re...

Thats more like it, then chuck in the number of people earning less than you can survive on and what do you end up with ? The numbers will always be minimized by the government and will not reflect the real world situation. Working a few hours a week doesn't qualify as being employed. Adding in the number of people who do not earn above a certain dollar amount each week would be considered under employed not employed.

New Zealand 10 Year Government Bond - 1.35% +~12bps

The term discount factor rising this rapidly must certainly blunt property speculators' zeal to capitalise the falling present value of future asset cashflows and maybe the opposite prevails and residential property values stabilise, rather than burst at current yields.

https://www.bloomberg.com/markets/rates-bonds

NZ bonds large shift today.
Seems other part of the world the 10 year bonds are on the rise.

No migrants to fill roles, more jobs for kiwis.

The seasonal unemployment figures cannot be used as a forward indicator. Economists underestimated the impact of retail seasons and the logistics industries. I had said it once and I'll say it again, if you spent 10 years studying economics, you'd wasted 8 if you intend to make money out of it.