Roger J Kerr thinks one rogue number will not panic the RBNZ who are trying to avoid an inflation pincer move where tradable and non-tradable prices both spike next year. Your view?

 By Roger J Kerr

Can you trust the numbers?

Last week’s HLFS employment figures were a real shocker; however on a number of counts the numbers appear somewhat dodgy to say the least.

The employment measure is just a survey of households and is not an accurate count of jobs gained and lost from employers.

Employment trends have historically lagged GDP growth by nine to 12 months.

The economy was expanding 12 months ago and posted a 3% annual growth rate over the first six months of this year.

Robust growth does not always guarantee automatic jobs growth as it depends on what parts of the economy are expanding.

The stronger than expected growth earlier in the year was largely a massive lift in agriculture production due to the great climatic conditions, so that did not necessarily require a whole lot of new jobs to ship the additional containers to export markets.

However, in the September quarter there was strong jobs growth in the primary sector with public sector, construction, manufacturing and retailing losing jobs.

The decrease in the construction industry does not stack up to other measures that have recorded strong increases in relation to the Christchurch rebuild over the same time period.

Job adverts are only slightly trending down and official unemployment benefits decreased over the quarter, so it does appear the HLFS is a rogue figure that will correct itself over coming quarters.

Governor Wheeler will therefore not be reading too much into this seemingly negative economic development that has attracted plenty of media attention.

Also attracting media attention is spiralling house prices in Auckland. Herein lies the dilemma for Governor Wheeler, he cannot take the risk to further fuel the residential property market with even lower mortgage rates, even though many are seeing the economy slow and are calling for interest rate cuts.

It’s the age-old Jekyll-Hide and weird attitude held by many New Zealanders that it is OK to talk the economy down, however they take real issue with anyone who might suggest the value of their house might go down as well.

Mr Wheeler would not want to get caught in an inflation pincer move of non-tradable inflation (domestic prices) increasing further on a mini housing boom and then find the NZ dollar falls and tradable inflation also increases in 2013.

For these reasons the new Governor will not react to the pressure coming from Opposition politicians that he somehow needs to use unconventional monetary policy measures to save an economy that is growing at a rate of between 2% and 3% per annum.

Graeme Wheeler has seen a few economic cycles in his time and will recognise a rogue number when it jumps out at him.


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 Roger J Kerr is a partner at PwC. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at

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Yeah, I don't like the figures. Itr's not what I expected. IT MUST BE DOGGY.
Let me find a nice hole to put my head in.......

What if the figures are not dodgy? You would hope for a start that someone is trying to verify them one way or the other with some urgency.
My understanding is that the inevitable result of an overvalued exchange rate, and a relentless current account deficit in a tough world, is that at some stage unemployment will come (and only then eventually the exchange rate collapses). We cannot keep employment up forever selling each other houses, and making each other lattes, while borrowing $30 million a day offshore to pay for overseas made stuff. 
If the figures are accurate, does Mr Wheeler sit on his hands still, and pretend that the next quarter they will magically get better? Does he drop the OCR, even though that will, as you say, probably lift the housing bubble, without really helping employment? 
Or does he consider some of the other tools and measures suggested by the opposition?
My understanding is that he says unemployment is not at all his concern. Inflation (measured by the CPI, not direcly asset bubbles); and bank failures are it. No more. No less.
So he doesn't really care about the numbers, other than they may hint at lower inflation some time in the future.

For what is worth, everyday indicators are up from last year. More job offers in the papers, less people out and about looking for something to do. A lot of young people I know have gone to Aussie to find emplyment, and very few people are immigrating to New Zealand these days, compared to say a decade ago. The banks' profit is growing steadily...
I'll go with Roger on this one. Employment figures will be revised downward. 

Another attempt at a self fulfilling prophesy from Mr Kerr

But but but - all the consultancy presentations assumed growth beyond what any eye could safely see. The forecasts of contingent interest rate rises undepinned the need for corporate and LA clients alike to engage merchant bankers to undertake borrowings and derivative hedging strategies to supply that which cannot be serviced and most probably wiil remain under utilised. But those acting in concert to collect the outsize salaries and fees had to do something and in fact anything to justify them and allay sleep deprivation.- growth was and is the only answer right or wrong.

The problem with official unemployment benefits is it doesnt record the professionals out of work does it?, while the household survey does?  Just who is bing made redundant in Wellington? middle managers etc....those who cant claim benefits unless both couples incomes go bye bye?
So what you are doing is cherry picking to my mind....2? 4? years of denial that all is not well...
What will it take to open your eyes?
1930 again?

Well it's going to do either one of two things in the short term...