By Bernard Hickey
Statistics New Zealand has reported the unemployment rate fell only slightly in the June quarter as continued growth in the labour force from migration and an increased participation rate soaked up almost all of the 58,000 jobs growth in the quarter.
However, economists were cautious about the reported record-high 2.4% jobs growth in the quarter, saying changes in the survey included many self-employed as employed for the first time, making the June quarter survey difficult to compare with previous surveys. It also included 10,000 people living in armed forces residences who were included as part of the work force for the first time.
Unemployment fell 1,000 to 131,000 or 5.1% of the work force in the June quarter from a revised 5.2% in the March quarter. The unemployment result was broadly in line with economists' expectations, although the heavy revisions have made forecasting difficult. The participation rate rose to 69.7% from 68.8%. The labour force grew by 57,000 during the quarter after the strongest nominal population growth (97,300 or 2.1% of the population) during the year to June in New Zealand's history.
The New Zealand dollar initally spiked more than 40 basis points over 73 USc on the strong employment growth figure, but then retraced when it became clear the figures were affected by the new survey methods.
The Household Labour Force Survey's results were delayed from August 3 when the Quarterly Employment Survey and the Labour Cost Index were released after a significant revisions to the series to bring Statistics NZ standards for proving job seeking into line with international standards. See more detail on the changes here.
Statistics New Zealand said it had included a new under-utilisation measure for the first time. It said this measure provided an indication of the potential labour supply and included people who are employed, but want to work more hours (underemployed), those who want a job but are not currently actively looking or available to start work, and people who are unemployed by the official definition.
"A total of 342,000 people were underutilised in the June 2016 quarter, which equates to an underutilisation rate of 12.7. In future we will present this measure along with the unemployment measure as a way to better understand the untapped potential in the labour market,” Statistics NZ Labour and Income statistics manager Mark Gordon said.
'Be careful with the figures'
Infometrics Chief Forecaster Gareth Kiernan described the headline jobs growth figure as deceptively strong.
"Statistics NZ noted that changes to the survey’s questionnaire appear to be leading to better identification of people defined as self-employed – people who would previously have been counted as not in the labour force," Kiernan said.
ASB Chief Economist Nick Tuffley said comparisons with previous periods could not be made.
"Of the very strong Q2 employment growth relative to Q1, Stats NZ is unable to distinguish whether it is genuine employment strength or merely the impact of surveying changes," Tuffley said.
"As such, we cannot read into the Q2 results any implications about the strength of the economy or implications for the interest rate outlook. It is best to treat the new HLFS survey as a structural break from the previous one," he said, adding it would take three more quarters for the data to settle down.
"The new HLFS survey now captures self-employed people better, pulling people into the labour force which were previously excluded, hence the moves higher in the size of the labour force and the labour participation rate. The survey now also includes armed service people in private residence (+10,000 alone). However, beyond the known armed forces impact, it is impossible to break out the drivers of the remaining 48,000 lift in employment between survey changes and underlying employment."
(Updated with more details, reaction, chart)