Stunning unemployment fall

Unemployment plummets to 6.2% according to Statistics New Zealand; Market had expected a rate of 6.8%

9th May 13, 10:48am by David Hargreaves

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

Unemployment dropped sharply in the March quarter to 6.2% from 6.8%, according to Statistics New Zealand's Household Labour Force Survey (HLFS).

The figure is much lower than the market consensus expectation of a figure of 6.8%. The latest figures are sure to perplex economists, being much stronger than expected.

This follows two quarters where first the unemployment rate came in much higher than anticipated and then in December the numbers of people in employment were much weaker than expected.

The Kiwi dollar shot up more than half a cent in value against the American dollar, reversing all of the falls caused yesterday by comments from Reserve Bank Governor Graeme Wheeler that the RBNZ had been intervening in the currency markets.

Tertiary Education, Skills and Employment Minister Steven Joyce welecomed the figures as a sign the economy was heading in the right direction, but said: "While the fall in unemployment is a good result it may be a little too good as this survey is known to move around and we need to be cautious."

Westpac chief economist Dominick Stephens and senior economist Felix Delbruck said the employment figures "gave an unusually clear signal that the labour market has improved".

Broad improvement

"Interestingly, the labour market appears to have improved outside of the quake-affected Canterbury region. The NZ ex-Canterbury unemployment rate fell from 7.2% to 6.5%. This contrasts with last year, when the signs of labour market improvement were pretty much confined to Canterbury, " they said.

"The signal in this data is clear. But that does not mean it is 'correct'. The HLFS has thrown some wild signals in recent years. Last year, the HLFS was much weaker than other labour market indicators."

Stephens and Delbruck expressed caution in looking at the HLFS figures and said it was worth considering a wide range of labour market indicators. Wider labour market indicators suggested that the New Zealand labour market was roughly flat in 2012, but has improved modestly in the March quarter of 2013.

Important for RBNZ

"This is important for the Reserve Bank. In the September quarter of last year, the unemployment rate leapt unexpectedly to 7.3%. The RBNZ, alongside most other economists, suspected that was probably a rogue signal. But nobody could be absolutely certain. The RBNZ fretted about the possibility that the labour market really was getting weaker," they said.

"Today's data strongly discounts that risk. The central bank is now free to focus on the other factors affecting inflation - the Canterbury rebuild and rising house prices on the upside, Government austerity and the high exchange rate on the downside.

Statistics NZ in releasing today's figures said the employment rate rose to 63.7% from 62.7% in the December 2012 quarter.

The 6.2% unemployment rate compared with a revised figure of 6.8% (revised down from 6.9%) in the December quarter.

There were 38,000 more people employed this quarter – up 1.7%.

Range of industries

Statistics New Zealand said the rise in employment came mainly from full-time employment and was across a range of industries, industry and labour statistics manager Diane Ramsay said.

"We saw labour market conditions improve over the quarter as employment increased and unemployment fell. This improvement followed a period of weakness over 2012, when employment and labour force participation fell," she said.

"However, while this is a strong turnaround, the labour market has yet to recover to levels seen at the start of last year."

The number of people unemployed fell by 15,000 over the quarter.

"We usually see actual unemployment rise in March quarters as a result of seasonal factors, such as students entering the job market. We didn't see this happen this quarter, and this has resulted in a larger than expected seasonally adjusted quarterly fall," Ramsay said.

Labour force rises

The number of people in the labour force rose in the March 2013 quarter.

As a result, the labour force participation rate rose 0.6 percentage points to 67.8%. Despite increasing over the quarter, participation fell 0.8 percentage points over the year to March 2013.

The number of people outside the labour force decreased in the March 2013 quarter. Over the year Canterbury's labour market has continued to improve, with both employment and participation rising.

The region's unemployment rate is now down to 4.3%. Excluding Canterbury from the national estimates shows a much weaker labour market, with both the employment rate and labour force participation rate falling over the year.

Unemployment

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Source: Statistics NZ

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30 Comments

by andyh | 9th May 13, 10:51am 1368053502

Crikey - how much longer can the RBNZ justify maintaining interest rates at record lows? The economy must be growing at a rate above 2.5% now, and Treasuries forecast of 3% plus for 2014 is not looking far fetched anymore. Time to take the punch bowl away Mr Wheeler.

by Stephen Hulme | 9th May 13, 10:59am 1368053958

Hmmmmm- Over the year Canterbury's labour market has continued to improve, with both employment and participation rising. The region's unemployment rate is now down to 4.3 percent. Excluding Canterbury from the national estimates shows a much weaker labour market, with both the employment rate and labour force participation rate falling over the year. Read more

We cannot depend on disasters to make employment and economic growth look better for incumbent governments. Where's plan B?

by dobrydan | 9th May 13, 11:11am 1368054681

I'll show it to my students - the poor buggers won't know what's hit them when they leave school!

Similar scenes to Greece... anarchy in the USA... meanwhile Bernanke keeps printing those bills.

by dh | 9th May 13, 11:12am 1368054722

"The latest figures are sure to perplex economists, being much stronger than expected. This follows two quarters where first the unemployment rate came in much higher than anticipated and then in December the numbers of people in employment were much weaker"

So the takehome is the economists are rubbish at predicting unemployment.'

Definitely a headline good news figure for the government. Burrowing into the figures it is largely Canterbury bouncing back that is carrying it, being the area showing the growth, and by far and away the growth sector being construction.

That said, the warning sign from the report is that employment in manufacturing, transport and warehousing is all down more than 3%.

by Les Rudd | 9th May 13, 8:36pm 1368088583

David C - now I understand why your'e not answering my questions:

http://www.interest.co.nz/opinion/64294/mondays-top-10-nz-mint-get-rid-basel-iii-money-nothing-monetary-emissions-wrong-way-ri#comment-735474

".... employment in manufacturing, transport and warehousing is all down more than 3%."

Where are the charts of investment made and jobs created? More importantly, does it look like NZ is strengthening it's export mix and economy?

Cheers, Les.

www.changenz.co.nz

by Happy123 | 9th May 13, 11:31am 1368055909

Strong GDP growth, country returning to surplus, unemployment at record lows all this off the back of the worst recession in 70 years.

Yet the majority of posters on this site persistently post doom and gloom, do you all get up on the wrong side of the bed every morning? Be honest, how many of you are paid Green/Labour party supporters? And before you all start calling me a Key fan boy, I didn't vote for National in the last election, probably won't in the next, I just don't have a problem giving credit where it's due.

by andyh | 9th May 13, 11:57am 1368057477

If the posters above are right about this being a Canterbury driven phenomenon (and I dont dispute its importance, but its the totality I am interested in) then if you were being fair shouldn't you be giving credit to the earthquake rather than the government? (sounds brutal I am sure but is it not a valid point?).

Had CChurch not had the earthquake how would the economy be looking now?

by south paw | 9th May 13, 12:12pm 1368058345

Keep drinking the cool aid, Happy.

by dollar_bill | 9th May 13, 1:24pm 1368062674

unemployment at record lows

did you look at the chart? I didn't because I nearly posted a link to it

what record low are you refering to? A record low for the toffs?

Well then, that's a policy failure isn't it because lower unemployment equals higher costs for serfices.

I suppose they can't have it going too high or they'd lose support of their "toff wannabe quotient"

by powerdownkiwi | 9th May 13, 8:19pm 1368087540

H123 - firstly, GDP is a horsepoo measure. If we all went out and ran into each others cars, GDP would go through the roof. The actuality would be that we would be worse off. Same with Chch. In many year's time, they may get it back to somewhat less than they had.

Surplus? Hasn't happened yet, and the way Europe is going, and the way the Dow is reacting to QE, I wouldn't be holding my breath. Oh - and are we referring to a genuine total surplus, as in 'in the black, real-time'? Or just a year with a non-negative balance of payments?

Unemployment - nobody suggests we will have unenployment where we are going - in fact I point out that it will be all-hands-to-the-pumps as energy-per-head decreases. Just how much those workers will be able to actually purchase with any 'income', though, is moot. Be intersting to know what total income was/is.

Haven't been a member of a political party for at least 25 years, and currently think they're all going in the wrong direction - some more than others, of course.

by goNZ | 9th May 13, 11:50am 1368057017

you tell 'em happy123

a fantastic result - thanks Australia for providing all those jobs or we would have 15% unemployed...

by SK | 9th May 13, 11:55am 1368057303

Breaking news Sydney Morning Herald.

http://news.smh.com.au/breaking-news-business/nz-unemployment-drops-to-62-per-cent-20130509-2j91z.html

Lock up your daughters - the convicts are coming!

by Chairman Moa | 9th May 13, 12:52pm 1368060738

Julia will be looking for new opportunity in October.. Key and Shearer, she wants your job.!

by dh | 9th May 13, 4:01pm 1368072102

Just as surprising to economists was that australian unemployment fell as well (more modestly than NZ's but it was lower to start with).

by Magnum | 9th May 13, 12:06pm 1368058002

Goood result but not feeling it yet - then again I am in Wellington

by south paw | 9th May 13, 12:40pm 1368060007

Yeah, well our great leader informed us yesterday that Wellington was dying and he had no idea what to do about it.

by Chairman Moa | 9th May 13, 12:44pm 1368060252

Well, get Tim Shadbolt to become mayor. If he can turn Invercagill around then wellington should be a breeze!

by speckles | 12th May 13, 10:32am 1368311567

Kimy, only idea I have seen as yet that may work!!

by Chris_J | 9th May 13, 4:04pm 1368072273

These are dart board statistics! Such unlikely variations in these numbers make them unreliable and unbelievable.

by Matt in Auck | 9th May 13, 10:38pm 1368095938

agree. Until there is another quarter of stats confirming this, I won't put any faith in it. I'm still sticking with my prediction of 7% by year's end

by dh | 9th May 13, 4:25pm 1368073504

When the census data is out, it is going to be interesting to look at the issue of opportunity, emmigration to australia, and youth unemployment. The latest youth figures of 16 and a bit percent are horrible by world standards, but quite frankly a relief compared to where it has been heading the past few years. The big question is how movements to australia have influenced things (externalising the unemployment) and that could be read from the changing census demographics.

by Stephen L | 9th May 13, 6:53pm 1368082381

Of all the usual economic measures- inflation, GDP growth and per capita, fiscal and current deficits as well as unemployment; it is the unemployment one that is saddest when it is high and getting worse.

So this drop is good news no matter how it's looked at.

We do seem to be building an economy that is based on construction- so at least hopefully improving living conditions and keeping the place as one of the nicest places to live for most; dairy farming to pay at least some of the overseas bills; and other domestic related services.

International competitive businesses are being compromised to fit those priorities; with exchange rate and monetary policy unhelpful.

We also do not seem to have any focus on long term wealth creation for the country, other than building nicer houses (which at least is a reasonable start).

Nevertheless, the considerably improved unemployment number is good news indeed; and to the extent the government was involved; well done.

by Crazy Horse | 9th May 13, 8:54pm 1368089663

Question for all ....at what point, is the minimum hours worked, for say a week, required for someone to be classified as fully "employed" ?

I would imagine the minimum hours worked would not be enough to support yourself, therefore you are actually "underemployed" and would be being supported by other parties...whether that be by family members or government.

Therefore these people are "underemployed"and not fully employed .....so these released unemployment figures from Statistics NZ are totally skewed and incorrect ....but looks good for the government, with an election coming up :)

Peace to all

by dh | 10th May 13, 11:03am 1368140606

Statistics NZ have always been very open about where there data comes from and how they analyse it, if you want to find out what things like fully employed mean, head to the report

http://www.stats.govt.nz/browse_for_stats/income-and-work/employment_an…

and click the Definitions link

by Crazy Horse | 11th May 13, 9:17pm 1368263826

dh thank you very much for the link, which the following was found under "Definitions" :

Employed: people in the working-age population who, during the reference week, did one of the following:

worked for one hour or more for pay or profit in the context of an employee/employer relationship or self-employment

Can I please have a job where one hours work would cover all my weekly outgoings and expenses !

Cheers

by dh | 11th May 13, 10:55pm 1368269713

The full report (pdf linked off the report pages) divides Employed in Full (30+hours a week) and Part(less than 30).

by Vera Fayed | 10th May 13, 11:26am 1368141967

Crazy Horse. I was pondering whether there is a word for the syndrome whereby a person considers any statistic that conflicts with his/her bias to be conspiratorial. I found it. It is called stupidity.

by Crazy Horse | 11th May 13, 8:59pm 1368262798

With all due respect Ms Fayed, it is my right to question any statistic, as to the basis on how, where and why the information was gathered and what sample groups were used, also what is the standard deviation/p value of such statistical information.

While another very important factor is, who is this information going to be presented to and for what reason ?

To believe that absolutely every statistic, that is published is totally robust and unbiased, would be to be misled and naive. .

Enjoy the weekend

by Vera Fayed | 12th May 13, 9:20am 1368307231

@Crazy Horse. In the light of your fine rebuttal to my undue and unconstructive sarcasm, I offer my apologies. As penance I do hereby pledge to perform at least one random act of kindness per week until the Flying Spaghetti Monster calls me to the Great Noodle Soup In the Sky.

by janesimpson | 3rd Jul 13, 9:41pm 1372844516

"Unemployment dropped sharply in the March quarter to 6.2% from 6.8%"

This is not bad though. The range in percentage seems not too high in unemployment rate but still it gives an indication of good start. It is also a hint that we are recovering little by little in the economic downturn that we have. Maybe there are still disappointed with this news but hey, let us all be patient for the progress. As the cliche goes, slowly but surely and keep your fingers crossed people. We are all wishing for the good economic status that will give us a bigger opportunities of employment. I know no one wants to be homeless and starve to deth when that days comes. Money is not a problem, there are financial assistance out there that will give an answer to your monetary problems.