Jobs grew 35,000 or 1.4% in Sept quarter, but unemployment fell just 3,000 and jobless rate falls to 4.9% from 5.0% after participation rate jumps 0.4% to record-high 70.1%; wage growth still subdued

Jobs grew 35,000 or 1.4% in Sept quarter, but unemployment fell just 3,000 and jobless rate falls to 4.9% from 5.0% after participation rate jumps 0.4% to record-high 70.1%; wage growth still subdued

By Bernard Hickey

The New Zealand economy generated an extra 35,000 jobs in the September quarter, mostly in Auckland and mostly in real estate and rental sectors.

But record-high net migration and a rise in the participation rate to a record-high 70.1% soaked up those jobs and meant the unemployment rate fell only slightly and wage growth was subdued.

The 1.4% jobs growth was stronger than the consensus forecast by economists of around 0.5%, but private sector wage and salary growth of 0.4% for the quarter was unchanged and broadly in line with forecasts. Economists said they continued to expect the Reserve Bank to cut the Official Cash Rate by another 25 basis points to 1.75% next Thursday, pointing to the still-subdued wage growth and doubts about a heavily revised survey.

The New Zealand dollar initially jumped around 30-40 basis points to 72.1 USc after the figures, but did not follow through on what would normally be seen as very strong figures, given the doubts about the survey and the modest wage growth. Wholesale interest rates rose 2 basis points.

The strong jobs growth is being soaked up by an increase in the labour force from both net migration and a rise in participation in the workforce, particularly through a rise in the number of workers over the age of 65.

The universally available and non-means tested New Zealand Superannuation system allows people on the benefit to work at the same time. The number of over 65s working rose 3,900 to 156,00 in the September quarter from the June quarter and was up by 20,400 from a year ago. The participation rate for over 65s rose to a record high 23.7% from 21.6% a year ago.

The overall participation rate rose to 70.1% in the September quarter from 69.7% in the June quarter and 68.4% a year ago. The working age population grew by 24,000 during the quarter to 3.739 million, due mostly to migration, while the number of people not in the labour force fell 8,000 to 1.117 million.

This meant the size of the labour force rose 33,000 and unemployment fell by just 3,000 to 128,000. The unemployment rate fell to 4.9% from a revised 5.0% in the June quarter. This was the lowest unemployment rate since the December quarter of 2008. Unemployment has fallen by 7,000 over the last year and is up 1,000 from two years ago.

All this meant wage inflation remained subdued, despite some predictions that wage inflation may show signs of stirring, given strong jobs growth and economic growth.

The Labour Cost Index's measure of salary and wage rates for the private sector rose 0.4% in the September quarter from the June quarter, which was unchanged from the previous five quarters. Annual private sector wage inflation was 1.6%, unchanged from the previous quarter.

Just over half (51.6%) of the jobs growth was in Auckland, following by Otago with 20% and Northland with 17.8%.

Statistics New Zealand said the only industry to have significant employment growth in the September quarter was the rental, hiring and real estate services sector.

Economist reaction

ASB Chief Economist Nick Tuffley said the headline jobs growth figures appeared to be very strong, but changes in Statistics New Zealand's Household Labour Force Survey meant the figures should be treated with caution. He said he still saw another cut next week, with the chance of another one early next year.

"There are no indications in the labour market results that reinforce the need for further OCR cuts beyond next week, though the RBNZ will downplay the apparent strength of the employment/unemployment figures given ongoing question marks about their reliability," Tuffley said.

Westpac Senior Economist Anne Boniface said the labour market had clearly continued to strengthen heading into the second half of the year, but this was not yet having an impact on nominal wages.

Boniface said the jobs growth figures were likely to be stronger than the Reserve Bank expected.

"Coming in conjunction with this morning’s stonking rise in dairy prices, this means the economy is probably on a firmer footing than the Bank anticipated at its last Momentary Policy Statement. However, there will be lingering concerns about the lack of wage growth and the impact of this on the inflation outlook," she said.

Kiwibank Chief Economist Zoe Wallis also described the jobs growth as remarkably strong, but pointed to the lack of a pick up in wage inflation.

"From an inflation point of view, what remains missing in this story of a tightening labour market is a notable pick up in wage growth. The rapid rise in the labour force participation rate - influenced by current record net migration - suggest that rising labour supply is keeping downward pressure on wage growth," Wallis said.

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(Updated with more detail, market reaction, economist comment)

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55 Comments

Wow, this must rank as one of the highest employment rates in the OECD , something we should be proud of .

All we need to do now is get the median wage rate up through higher productivity and a move towards a knowledge economy with strong emphasis on becoming a centre for global financial services and product innovation .

Whats stopping us ?

People are going to want to come here.

12
up

The property bubble is stopping us, because is depriving capital from productive economy and putting it onto speculative economy which, by the way, increases production costs.

The problem is that a big part of these employment data is related to services around the property bubble that will be erased as soon as it bursts.

So we cannot have the best of both worlds..

As Zachary points out:

The New Zealand economy generated an extra 35,000 jobs in the September quarter, mostly in Auckland and mostly in real estate and rental sectors.

Taxation is too high for us to become a global hub for financial services and product innovation.

Countries that are currently centers for global financial services and product innovation, such as Singapore and Switzerland have tax rates that attract talent and multi-nationals. NZ with our high tax and social security net attracts people who aren't planning on working as hard as they are now (ie. moving for the lifestyle).

Excessive private debt will stop us

.......but private sector wage and salary growth of 0.4% for the quarter was unchanged and broadly in line with forecasts.

Hardly enough to mitigate the deleterious impact this debt ratio exerts upon society.

Overall this is good news. However, we do need to get wages up. With the tightening of immigration, especially if the temporary visas are restricted, then we should see good wage growth next year - election year of course.

This isn't really good news at all.
35,000 more 'jobs' and only a reduction of 3,000 to the 'unemployment' number?
0.4% wage growth?
When you consider that overall, it isn't good news.

Plus, aggregate wage growth isn't going to happen in NZ. The only ones who will realise wage growth will be the highly skilled. Other demographics will be flat.
Immigration will tighten up, but I can guarantee you it won't be the low skilled immigration that suffers. Hence the reasoning for the above.

I still think it is good news to have unemployment below 5%. I did highlight the issue of wage growth so I think that needs to be the next issue tackled and I think that means tightening immigration especially in the unskilled category.

Come on..5% is a pretty arbitrary number.
Even more arbitrary when the rate is 0.1% below it.

John Key will say "average income" has gone up. Just like Nick Smith will say housing is more affordable* (*only if you already have a house and mortgage).

C plus still need to do better
Unemployment has fallen by 7,000 over the last year and is up 1,000 from two years ago.

This was the lowest unemployment rate since the December quarter of 2008. is a C+ ? especially during a period of global recession?

there are more unemployed now than then look into the numbers not the percentages
40.000 extra people still unemployed since the GFC. that's the size of Wanganui collecting the benefit
http://nzdotstat.stats.govt.nz/wbos/Index.aspx?DataSetCode=TABLECODE7080
https://en.wikipedia.org/wiki/List_of_cities_in_New_Zealand

I don't think that the raw number of people unemployed matters as much as the percentage. Having 100 people unemployed out of 100 people in your nation is much worse percentage wise than having 101 people unemployed in your nation of 100,000,000 , because the burden of supporting the unemployed can be distributed across more people.

nice if you are not one of the unemployed

That's the benefit of immigration - more total people lowers the percentage of "unemployed".

Out of work people of working age would show an even worse number than those defined as "unemployed"

The actual data (downloaded from StatsNZ Infoshare) is

- Q3-16 from Q3-15, additional employed = +142,600, reduction in unemployed = -9,300
- Q3-16 from Q3-11, additional employed = +293,200, reduction in unemployed = -9,100
- Q3-16 from Q3-06, additional employed = +348,300, increased in unemployed = +43,400

In ten years, the number of employed people has risen +16.4%.
The 10 year growth of people actually in employment is larger than the population of Christchurch.

At the risk of sounding like a Wet: something has to be done for the hordes of poorly educated unemployed in the regions. They just drift about getting more antisocial by the day. It is not all their own fault, the complexities involved (imposed by government funded busybodies, "modules" and such) just for labouring work, effectively lock them out of the workforce. There is going to have to be some strong medicine applied here all round, including compulsion.

I wonder how many are kept out of work due to positive drug tests.

Quite a lot based on anecdotal evidence of those offering jobs but seeing no shows as soon as the drug test condition is explained.

To put this problem in context - the gangs cleaned out 14 - yes 14 drug houses in tiny Ngarawahia.

God knows how many there must be - and their customers of course - in the Wairoa's, Kaitaia and Kaikohe's of this world.

Prison builds and operating costs are a major component of GDP growth. Not unconnected I suspect.

If the unemployment rate is 4.9% s.a. (4.8% actual), it does make you wonder what the % of the population that regularly takes judgement-affecting drugs. My anecdotal experience is that this is much higher than 5%. So many, many people have jobs who are regular takers. It's a huge safety risk, for fellow employees, and for employers. What would the jobless rate be if employment testing became mandatory? (as it should.)

.

I think it is called self responsibilty.

That is why we are building more prison beds. There is work out there for those that want it. We are even employing foreign laborers for fruit picking and other industries because our unemployed are so lazy they wont do that work. If you are a lazy bludger who resorts to theft or robbery a stint inside is justified.

The real progress we need is to bring down our prison costs. $100k per annum for each prisoner is too high. I could get it down to $2k if I had 5 gun boats, a tonne of burley and one of NZ's many uninhabited islands;)

Just revoke citizenship for anyone who gets a jail term of over 2 years and drop them off somewhere in Syria with a couple of weeks rations. They'll have the opportunity to enlist in the military to fight some terrorist, everybody wins.

'The degree of civilization in a society can be judged by entering its prisons.' Fyodor Dostoevsky. NZ sits at entirely the wrong end of the graph in terms of its incarceration rates. In other simpler words, we imprison a greater number of people per head of population than almost any other developed country. Source: The Spirit Level,P148.
This should be a source of national self-examination. What are we as a society doing wrong? The cost of this regressive thinking is truly enormous for everybody;socially and financially.
Do you really think that the Nordic countries with significantly lower rates of incarceration are infested with criminals who should all be locked uop,or are they perhaps more enlightened? I know which approach I prefer,both as citizen and taxpayer.

The problem noone can voice out loud is over representation in the prison system of a certain demographic. Our numbers would look like the Nordics if we didn't have them dragging our numbers down. Funnily enough, immigration will solve that problem given enough time.

Immigrants will become stronger voting blocs over time and will rightly protest against giving people special treatment.

The New Zealand economy generated an extra 35,000 jobs in the September quarter, mostly in Auckland and mostly in real estate and rental sectors.

A round of applause for all those involved in the Auckland real estate and rental sector. What does it mean, more agents and property managers?

It means more pseudo lobbyists

What percentage of this unemployment figure are unemployable?

Is it possible to get the unemployment figure less anyone who failed a drug test or elected not to turn up to work for more than 5 days a year without a valid medical reason?

Great to see more people working but these pop the bubbly numbers mask the reality that Auckland's per capita GDP generation continues to slide relative to the the rest of the country. As it has for the last two decades. Real growth is stuttering and we remain a cows and camper van economy. The think big immigration experiment is choking Auckland and failing to deliver the structural shift in our economy that its bureaucratic advocates promised.

Totally agree with this comment

Great news. Now lets work on getting incomes up. Who cares about GDP, it's incomes for the inhabitants of these isles that is important.

lower taxes and we'll have more "effective income"!

Which taxes did you have in mind? GST

Yup, dead right. It's irrelevant. Absolutely no link at all between GDP and incomes.

I'm pretty sure consumption is a key link between income and GDP...

Yes it is. Forgive my facetiousness.

It is measured in two separate ways. By Expenditure, and by Production. In the end they give the same result, but there are always variances quarter by quarter.

is happening. Average weekly earnings up are 1.8%.

Where did all those 70 thousand odd immigrants get a job at..pray tell us.

Lets dig out the total benefit spend change over the period.....take out Nat Super if you like. These might tell a more interesting story aboy how we are doing. A good graph to add to your collection on Int.co.

I wonder what the unemployment rate is by region? Would be good to see the figures for the main centres.

Better employment rate, milk prices up, Auckland housing slowing, all sounds pretty good to me. I'm baffled by the many negative comments

You sound like a politician's best dream.

You are so right - this really is God's own country and for those who who doubt this - open our borders to all and sundry and see if they come or go. We all know what the result would be and overnight given modern communications.

The reality is we have never had it so good. Increased life expectancy, record low unemployment, strong growth, very low Crown debt, surpluses. Many nations would die for our macro variables.

Of course it's not perfect and some have been dealt or played a bad hand. To quote Madeline Albright - ours is not a perfect society - it's just better than all the rest.

This is the very fortunate situation we find ourselves in today - and much of our own making.

Reflect on all the tough structural reforms undertaken by both Governments over the last 30 years.

Floating the $, Universal GST, Dividend Imputation, Pharmac, Commerce Commission, Electricity Authority, ITQ's for fishing, Kiwisaver, Fiscal Responsibility Act - the list goes on and on and we really do reap what we sow.

Look at our Australian neighbours if you want to see what inaction achieves.

This is about as good as it can get and let's give a little credit where credit is due.

Okay, new benchmark set for a politician's dream voter.

The trifecta with this one;
God, economic performance, better than Australia.
It's a pity that the notions are all phony.

Nymad, why don't you emigrate to a "better": country ?

Like the heaving masses wanting to come here is the measure of our success as an economy! Maybe one or two flaws with that rationale?
Growth is not ‘strong’. Migration driven demand for infrastructure and the housing generated wealth effect compose most of the current GDP growth numbers. Strip those factors out and the net rate of economic growth from what we produce, is flat.
Yes, Crown debt is in good shape thanks to prudent management but don’t mention private debt as I have a slight hunch that may not be quite so spiffy.
But, in a blue sky world maybe it will all just keep rolling on, our two trick farm and tourism economy might remain immune from droughts, disease and competitive headwinds, we could build travelators across the Tongariro crossing to cram even more tourists in and we ain’t never had it so good folks, this ‘ere housing dreamworld ride will never crash.
The sheer weight of people is strangling Auckland. Politicians on both sides equivocate, unwilling to challenge the populist ideology that mass immigration is good for us. Despite the mounting evidence that it is not delivering the core economic growth and diversification which is the very rationalization used to justify it.

Lesley Stahl on U.S. sanctions against Iraq: We have heard that a half million children have died. I mean, that’s more children than died in Hiroshima. And, you know, is the price worth it?
Secretary of State Madeleine Albright: I think this is a very hard choice, but the price–we think the price is worth it.
—60 Minutes (5/12/96)

Low unemployment, low interest rates, low inflation.. just wait for lower house prices and then JK can have another term. Yep, I am drimmin!

"but changes in Statistics New Zealand's Household Labour Force Survey meant the figures should be treated with caution. "

In other words people, don't be such utter complete mugs! Jezz

They were quite minor, quite technical, and an improvement. They were made in June 2016, not September 2016. You can see the details here. It is wrong to dismiss the data based on the impact of those "changes". When changes are made, it is standard to advise that they were made and standard to advise 'caution'. Its the conservative thing to do.