By Alex Tarrant
The number of people employed rose by 30,000 in the three months to March, the largest quarterly increase since mid 2008, primarily due to a rise in people entering part-time work, seasonally adjusted figures from Statistics New Zealand show.
The number of unemployed people dropped by 2,000 to 155,000, with New Zealand’s unemployment rate falling 0.1% to 6.6% in the March quarter, from a downwardly revised 6.7% in the December quarter (revised from 6.8%).
Economists surveyed by Reuters had been expecting a 0.1% fall in the unemployment rate to 6.7% from 6.8%.
The New Zealand dollar rose 30 basis points to 79.30 US cents immediately after the release, as the unemployment and employment figures came in stronger than expected. However, economists said the figures didn't change their views on when the Reserve Bank would reverse the March 10 cut in the Official Cash Rate. Most still expect a December or March quarter hike in the OCR.
The increase in employment in the March quarter was the greatest quarterly rise since the June 2008 quarter, Statistics New Zealand said.
'Create a job myself'
Annually, employment grew 39,000 – with equal growth in male and female employment. Contributing to this was an increase in the number of self-employed people by 26,300 during the year, Stats NZ said.
“There has also been a steady rise in trend employment since the September 2009 quarter. Together, these results indicate signs of continued strengthening in the labour market,” Stats NZ labour market statistics manager Diane Ramsay said.
The 6.6% unemployment rate meant New Zealand moved up to eleventh-equal with Israel in the OECD unemployment table from twelfth in December, above the Czech Republic at 7%. The unemployment rate in Australia is 5%, but is forecast to drop as low as 4.5% in the next two years as 500,000 jobs are created.
Participation rate rises
The labour force participation rate – those employed or officially unemployed – rose 0.8 percentage points to 68.7% of the total working age population in the March quarter from December. This was the highest participation rate since December 2008, Stats NZ said.
There were, 2,369,000 people in the labour force in the March quarter, up 28,000 (1.2%) from December. The working age population rose by 4,000 (0.1) over the quarter.
The number of employed people rose 1.4% to 2,214,000 during the quarter, Stats NZ said.
Primarily part-time employment
Part-time employment rose 4%, or by 19,000, in the March quarter from December, Stats NZ said. Full-time employment rose 0.5%.
Quake disruption
Meanwhile, Stats NZ said the earthquake that struck the Canterbury region on February 22 caused some disruption to interviewing for the March release.
"Statistics New Zealand suspended interviewing in parts of Canterbury, which meant we did not interview about 800 of the 2,200 Canterbury households in the survey sample over the March 2011 quarter," Stats NZ said.
"Since there was no interviewing in such a large area of Canterbury, any changes in labour force status as a result of the earthquake will not be observed in this quarter's results," Stats NZ said.
Politicians react
Minister for Social Development, Employment and Youth Affairs Paula Bennett said there were encouraging signs in the jobs market.
“It’s been a long haul since the recession, but many New Zealanders are now feeling more optimistic about the future,” Bennett said in a media release.
“What we’re seeing here is more jobs and more people in work, which are really encouraging signs but it’s a modest recovery,” Bennett said.
“While a drop in the unemployment rate and a rise in employment is good news, we’re yet to see the full effects of the Christchurch earthquake,” she said.
“The number of young people in work has risen by more than 4,200 over the last year to March and the number of young people Not in Education Employment or Training (NEET) has fallen steadily from 10.8% to 9.9%.
“The Youth Unemployment rate went up to 18.8% in the last quarter, but a further 4,200 also going into work is good news,” Bennett said, refering to figures for 15 to 24 year olds.
“Many young people have made smart decisions about staying in education, going into study, or moving to where the jobs are,” she said.
The Maori unemployment rate went from 15.5% to 16.1% in the March quarter, while Pacific Unemployment rates went from 13.5% to 14%. Pacific Unemployment rates dropped by 0.4% over the last year and while the Maori Unemployment rate has risen by 1.9%, the rate has continued to slow, Bennett said.
Economist reaction
ASB economist Jane Turner:
The number of people employed increased by more than expected over the March quarter, up 1.4%. This resulted in the unemployment rate easing to 6.6% from 6.7% in Q4 (revised lower from the previous estimate of 6.8%). Excluding Canterbury altogether from the survey revealed employment increased 1.8% over the quarter, suggesting the wider economy performed well over Q1. Excluding Canterbury, the actual number of hours worked increased 1.4% over the quarter, and up 2.7% over the year.
Over the second half of 2010, employers had been very cautious about hiring new staff, opting instead to increase work load of existing staff. Over Q1, it appears firms are finally confident enough to increase staff levels, by adding to part-time staff. Indeed, increased part-time employment largely drove the increase in overall employment this quarter.
While the impact of the February earthquake on Christchurch is not yet known (see below) it appears the September earthquake is having a severe impact on hours worked in the city. Including Canterbury into the nationwide statistics, the actual hours worked is revised from a +1.4% gain to a 0.9% decline. This is a significant difference, suggesting that many Cantabrians have had hours substantially cut back or are still not working at all (although technically still employed) as a result of the September earthquake. Further supporting this, while actual hours worked declined 0.9%, the number of hours respondents reported as usually working still increased 1.2%. This suggests the decline in actual hours work over Q1 is indeed usual and likely to be temporary.
Given we expect the February earthquake to have a more pronounced impact on employment, these figures are concerning. When the impact of the February earthquake is captured in the survey over the next quarter we anticipate a fall in employment and a further decline in hours worked.
February earthquake impact not captured in today’s report
The February earthquake caused some disruption to interviewing for the Household Labour Force Survey (HLFS). Statistics New Zealand suspended interviewing in parts of Canterbury after the February 22 quake, meaning around 800 of the 2,200 Canterbury households in the survey sample were not interviewed over the quarter. Because of this, any changes in labour force status as a result of the earthquake will not be observed in this quarter’s survey results. Accordingly, we expect a fall in employment as a result of the February earthquake will show up in the Q2 HLFS.
Implications
There are mixed implications from today’s report. On one hand, it is very encouraging to see how strong underlying labour demand was outside of Canterbury over the March quarter. This suggests the wider economy is indeed finally gaining traction in the economic recovery. However, it appears that the September earthquake may be having a larger impact on labour market activity in Christchurch than previously thought. This does note bode well for future employment figures, given the greater extent of commercial damage caused by February’s earthquake.
There are limited implications for the RBNZ from today’s data, given the Bank had pre-emptively cut the OCR by 50 basis points to 2.5%. The scale of disruption to labour activity in Christchurch highlights the need to leave interest rates low until there is evidence of rebuilding activity getting underway in Christchurch.
JP Morgan economist Helen Kevans
Nonetheless, even in the absence of the earthquake-effect, the labour market data is renowned for its volatility. The unemployment rate oscillated widely throughout 2010, with difficulties in the seasonal adjustment process giving us false signals throughout much of the year.
The steady rise in the trend employment rate since September 2009 quarter suggests, however, that a true (albeit modest) recovery is underway in the labour market. Indeed, on an annual basis, trend employment rose by 39,000, or 1.8%, in 1Q. The trend unemployment rate also has remained fairly stable since 3Q09.
Furthermore, on a seasonally adjusted basis, the unemployment rate fell 0.1%-point from 6.7% (revised down from 6.8%) to 6.6% in 1Q (J.P. Morgan: 6.8%, consensus: 6.7%), with the sharp spike in employment growth managing to offset that in the participation rate. We had expected the participation rate to jump 0.3%-points in 1Q, so the 0.8%-point increase surprised on the upside. The participation rate rose to 68.7%, the highest rate since end-2008.
We expect the recovery in the labour market this year to be gradual. Indeed, in the most recent NBNZ survey, a net 6% of respondents expected to hire staff going forward, a turnaround from the net 3% expecting to shed staff in the last survey. Fewer respondents (a net 23%) now expect the unemployment rate to rise. We expect the unemployment rate will edge lower, albeit at a very slow pace over the next year, to approach 6% by mid-2012.
(Updates with JP Morgan comment, ASB reaction, govt reaction, chart, quake comments, NZ$ move).
The chart below tracks unadjusted figures from Statistics New Zealand.
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