This week's jobs figures look fantastic, but they disguise flat real GDP per hour worked and an essentially stagnant economy where renters, the young and the unemployed have missed out

This week's jobs figures look fantastic, but they disguise flat real GDP per hour worked and an essentially stagnant economy where renters, the young and the unemployed have missed out

By Bernard Hickey

So what was the point of economic and jobs growth again?

It's worth asking this obvious question after this week's apparently stonkingly strong set of jobs figures. They showed an extra 35,000 jobs were created over the September quarter and that employment has grown 179,000 or 7.7% over the last two years. The unemployment rate also fell to 4.9% in the September quarter, which is its lowest rate since the Global Financial Crisis in December 2008 and down from 5.2% two years ago.

Those numbers looks terrific at first blush and are certainly much better than jobs falling by 179,000 and the unemployment rate rising. But a closer look shows the number of unemployed actually rose by 1,000 to 128,000 over that two year period and the number of 15-24 year olds who were Not in Employment, Education or Training (NEET) rose by 3,000 to 74,000. The NEET rate is actually unchanged at 11.1% over the last two years. The under-utilisation rate, which includes those people in part time jobs who want more work, fell in the September quarter to 12.2% from 12.7% in the June quarter, but is unchanged from two years ago.

The picture is no better for wages. Average ordinary time hourly earnings growth fell to an annual rate of 1.7% in the September quarter from 2.1% the previous quarter and is down from 2.3% two years ago. The Government's comment that real wage growth is strong because inflation is 0.2% ring hollow too, because inflation is set to jump back to 1% in the December quarter.

New Zealand's economy has thrown up an apparently bizarre mix of very strong jobs growth with virtually no fall in the various unemployment rates and a fall in wage inflation. It seems to make no sense. How can an economy be growing strongly at 3.5%-plus and not be heating up wage inflation or lowering unemployment?

The simple answer is that almost all that jobs growth over the last two years was soaked up by net migration of 131,188 and an increase of 28,200 in the number of people over the age of 65 who are working. That also helped soak up some of the heat from a strongly growing economy to avoid any break out in wage inflation. The last time the economy was growing employment this strongly was in the 2005-07 period when unemployment got down to 3.3% and wage growth was well over 5%. Astonishingly, even construction industry annual wage inflation was barely over 2% in the September quarter.

All these numbers should drag everyone back to the ultimate conclusion: it's always, always about productivity. Before anyone goes to sleep at the mention of the word productivity, it's worth knowing that productivity is all about output per person per hour, and that's what drives real wages. Real hourly wages are what really matters in any economy. They ultimately determine how rich any economy or household is in terms of income.

"Productivity isn’t everything, but in the long run it is almost everything," Nobel Prize-winning economist Paul Krugman wrote in 1994. "A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker," he said then.

On this measure, New Zealand's record is awful, and especially since 2012. Real GDP per hour worked has basically flat-lined over the last four years. We have managed to grow by importing more workers and working more hours per person. Our record is almost as bad over the last 45 years. We have been the second worst country in the OECD for real GDP per hour worked over that period. Worse than Italy, Portugal and France -- all of whom are now seen as basket-case, stagnant economies. Our relative underperformance over that period explains all of the 30% plus gap that has opened up between wages in New Zealand and Australia.

So why the self-congratulation about the current burst of GDP and jobs growth? Basically, we have kidded ourselves that we are richer because there is so many hours being worked by so many people and house values have almost doubled in the last 8 years. The rise in value of New Zealand's houses to NZ$1 trillion last month has made home owners feel much richer. These values have nothing to do with real incomes. They are all about high net migration, under-building and lower interest rates.

Renters, the young, the unemployed and the under-employed certainly don't feel the joy of this burst of growth. A much better aim for any Government or business would be to increase real output per hour worked and real hourly wages.

That would really be going for growth, as opposed to the growth we're kidding ourselves about at the moment. 

A version of this article also appears in the Herald on Sunday. It is here with permission.

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Productivity trends globally are being distorted by the demographics as retirees are increasingly working part time.

Same principle as "rent-a-crowd"

All the more the merrier. Looks good. Just not real


However, the wealthiest individuals in NZ benefit greatly from this growth as it accumulates at the top...and we know that is those individuals whom this government (and to be frank, most governments) care about most.

Current distribution of wealth in NZ, as per a NZ Herald article :
Top 1% hold 18 % of the Wealth
The next 9 % hold 41% of the Wealth
The middle 40 % hold 37.2% of the Wealth
The bottom 50% hold just 3.8% of the Wealth.
Of course, a crash in House Prices will drive more of the middle to the bottom. The top 10% may see some slight shift.
Capitalism has succeeded ?
How much of this is due to foreign/non-resident investments in Housing here and cheap labour due to migration of different categories ?

ALL of the house price inflation, beyond what is sustainable locally comes from overseas, either by expats returning, new immigrants and foreigners who do not live here in the market - I repeat, all of it. Control what you can of that, and prices will be more realistic. Foreigners buying we do not need, immigrants buying can be controlled, by limiting numbers and discouraging them making landlording their lifestyle here, as for people returning, if it were only them, the effect would be relatively negligible.

Smokey or anybody. What income level means you in the one percent ? And or. What level of Wealth (Assets ?) means you are in the one percent.

KH here is the link to the Statistics NZ analysis:


The answer seems so simple. Reduce labour supply (ie inwards migration) and demand for available labour will increase leading to wage growth and productivity gains (increased automation etc). We are often told that there are jobs that "kiwis" don't want to do and hence need to import labour. My question is why don't "kiwis" want to do those jobs?...because too often they are crappy jobs that no one should have to do AND if no one was there to do them either they aren't worth doing for the offered wages or they can be done by a machine not a dignified human being.

The answer to that is so often no Kauri - the industry I'm closest to is having huge trouble getting staff for a semi skilled jobs. Either they fail drugs tests, turned up and clearly perform like they don't want to be there, or just plain don't turn up unless they feel like it. If immigration was cut to any reasonable extend, these types of industries (2nd biggest in this case) would be in big trouble.

Are those semi skilled jobs replaceable by machines or made into skilled jobs by increased mechanisation? Is the industry worth keeping in the long run if it requires constant input of semi skilled labour? We lost a lot of industry that was subsidised in various ways to the economic reforms of the 80s. I just wonder if low/semi skilled imported labour acts as a subsidy to what would otherwise be unprofitable industry?

Grant A. What about paying better wages. You might find you get more interest in working for you, and from a better class of people.
Look at tourism in Queenstown for example. Going gangbusters in the last couple of years, hotels full as you can get and at significantly higher dollar daily rates - with an avalanche of cash coming into those businesses. But still they pay the same crummy rates and seek immigrants to do the work.
New Zealand and Queenstown would be better off if they upped their quality, because demand is such the visitors would pay for that. It might mean that gross numbers would not grow significantly, but the income could actually be greater, staff wages could be bigger and businesses would be richer.
Currently the low yield, low wage enabled growth is destroying the magnificent Wakatipu. The business equivalent of killing the golden goose.

For minimum wage jobs, just the cost of the bus fare or petrol to get there can be prohibitive.

Oh, and of course all those temporary work visa backpacking tourists from Europe and the US hired to work in hospitality are totally drug free. HAHAHAHAHAHAHA yeah, right.

KH - $60-70,000 for young unskilled guys living in the country sounds pretty good to me. Demand materially more and the job won't be there, either because it will get automated, or the industry won't complete globally

GrantA. Young and unskilled in Queenstown gets you 40K. If you are lucky.

kH - that's not the industry I'm talking about but rather agri - getting your hands dirty - get rid of immigration and those industries are in trouble despite paying the numbers I mentioned to good workers. There is high frustration in those industries about staff or the lack thereof

Well said. When employers cannot get slave labour ,they trot out the old phrase that there is jobs out there but people are to tired to do them.


All we are doing is dividing our wealth between more and more people.


Importing unemployment.

And no wonder it isn't translating into an improved economy when so much of the country's collective earnings is going straight into the black hole of interest paid to overseas banks via mortgages and rents. Employment numbers may look superficially OK, but when wages are depressed and disposable incomes low to non-existent for the majority, more jobs does not mean more customers. Buying goods and services locally is unaffordable for the average person. The vast minimum wage and benefits cohort is tapped out after the absolute basics, even with substantial taxpayer subsidies.

number of people unemployed is up by 40000 since the year before GFC, the percentage looks good because of high immigration .
this is a payment time bomb that will hit us in ten plus services and infrastructure that are not being grown with the increase in population will need more money spent to catch up

Our National Government has said we need to spend 100 bln $ on infrastructure in the next 10 yrs. That is a cost of $100,000 for each of our 1 million taxpayers. That is just some of the cost of our population growth.

"Productivity isn’t everything, but in the long run it is almost everything," Nobel Prize-winning economist Paul Krugman wrote in 1994. "A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker," he said then.


But while measured productivity was low in the last decade, despite Yellen’s “whole constellation of evidence” that the 1990’s were the real deal it has only been worse on this side of the eurodollar bust.

In fact, the numbers are so skewed that it highly suggests something wrong with them. Most people react viscerally when you question the veracity of widely-accepted statistics; they were, after all, put together by the best and brightest and kept a safe distance from anything that would introduce bias. And that is mostly true, but only up to a certain point. In the case of productivity, the point at which the questions start to really bite is much lower than for other figures. The reason for that is simple; it isn’t an actual estimate, but a plugline difference between two separate measures.

The BEA tallies output, really private output, a majority subset of GDP, while the BLS estimates total hours worked. The difference between them is output per hour, voila, productivity. Read more

Great writeup Bernard. Why be busy if you are not making a buck. It applies for a country as much as an individual. Why increase GDP if it limits incomes to do so. Indeed sometimes you (and the country) can make more money by slowing it down a bit. Look at the dairy farmers who run on low inputs, and thus less output than theoretically possible, and are more profitable


You dont mention govt spending should be increasing with the % of workers coming in. Its not. Also if the new jobs are low income jobs these people arent 'paying their way' but will actually be a burden on NZ and they will be receiving more benefits than paying tax. Essentially these people are working beneficiaries which seems to make up more and more of a % of the workers in NZ. This subsidised work and casualized work makes unemployment figures look good. This government is fantastic at marketing its success in terms of growth, unemployment but in reality as you mention many more people are missing out.

We need to pay people at the bottom more in wages. Business should not be able to pay people an amount that is not enough to live on. This is how you will grow your economy and make it fairer. Its not productivity that is the problem for NZ. We produce enough food for 100 million people. The problem is distribution of wealth and low wages.

The 'economy' is warped when you can work 40 hours or more in a week and still cant afford to 'survive'. Its modern day slavery or worse.

Stop measuring our economy with one or two statistics its just naive and insulting.


It really annoyed me this morning to hear "Business New Zealand" spouting it's usual line of increasing immigration to keep wages down. How does this help New Zealand ? What really really bugs me about this is that my money, via my membership of the Employers Association, goes to finance this lobby group.

Why are they so hell-bent on collectively eliminating their own customer pool?


My Nissan Nivara ute needs a new clutch, they quoted $2800 for parts, parts I can buy in the States for a couple of hundred dollars.

pissed off.

Don't just whine. If you think there is money to be made importing these parts, why don't you? There are zero restrictions.

Of course David, why don't we look at how to make money from everything rather than addressing issues and causes?

Ooh, what if that approach is the cause behind the world's social, environmental and economic issues of today? "The issues we face today cannot be solved by the same thinking that created them" - Einstein

Just about to hit the buy button.

Yet it is nice to support local service providers. A lot of small places provide the information to people who then go and buy things online. I had a client who owned a photography supplies shop in Auckland who would have customers come in and ask him advice and then go and buy online. He walked away from the business with nothing to show for it after many years of employing local people and providing a fabulous service.

Survey of building matarial costs compared with the USA recently showed that nz were approx 2.5 times higher.

No comment on ....

Labour's Robinson proposes charging employers a levy who bring in migrants to do work instead of training locals to do the work

Now that's smart


why not just cut the immigration, the reason they don't train is it is easier to import.
take away the option and they will have to train or pay to steal workers off competition.
in my industry everybody used to train young people not no more now just employ immigrants, very hard for a young kiwi to break in unless related to someone high

The media is pushing "diversity of staff" really hard at the moment for some reason. This dovetails in nicely with companies avoiding training people by just bringing in staff from overseas.

Taxing employers who want a drug-free workforce? Is it really that smart?


Starting from the ridiculous assumption that local=druggie is the part that isn't smart.


Not to mention the hilariously naive assumption that drug use is a blue collar and low-income thing. 25+ years in law enforcement tells me you'd probably get more hits if you drug-tested a group of lawyers, media people, young adult children of wealthy families and real estate agents. But nobody does, do they? Lawyer with a meth habit can go undetected for years.

Don't worry

Given the same circumstances in the future, David will pop out the same platitude

Complacent prejudice is so much less effort than thinking.

Very true.

so all 148000 people unemployed are druggies, lazy don't want to work, too stupid to train
that is a big assumption
the amount of stories I hear of people looking and unable to find work, down grading qualifications and CV I would suggest that assumption is just plain wrong

Something is radically wrong ...

This guy (in the NZ Herald article) comes to NZ with a mechanical engineering qualification but cant find work ... does an international student move and completes an advanced diploma in management (at an Auckland based Indian run PTE?)... has held jobs as a shelf packer on $15 per hour ... yet if you look up jobs for mechanical engineers there are 140 vacancies in Auckland ... now he is an office manager in a travel company ... obtained permanent residency because his engineering skills were deemed valuable to NZ

So what's going on?

Another thing I've been hearing about a lot is flaws in the algorithms for online applications, and all kinds of completely inappropriate pseudoscientific hurdles being placed in people's path by the HR industry. How many qualified people are applying for those jobs and being wrongly filtered out by the software?

At the other end of the qualification scale, there were a few stories from KFC whining that they couldn't get local staff and were unable to open on some days. Meanwhile locals had been applying through the only method available, which is online applications to head office, which were then ignored. Quite a few students and other applicants reported applying, never hearing back, giving up and moving on, only to have someone contact them months later, if at all.

And another thing ... how genuine are the mechanical engineer vacancies, if there are qualified people floating around who aren't being hired? Anyone investigated for links between the people placing the job ads and the people running the dodgy fake schools? Lots of people being take for a ride here, with the only people really benefiting being the owners of the PTEs and the shady immigration consultants proliferating in India. All the ingredients for an ongoing scam are there. Place ads for vacancies in whatever occupation. Set up fake tertiary training institution offering qualifications in said occupation. Show Immigration vacancies and get said occupation on skills shortage list. Round up paying suckers in India. Bring 'em over. Rent them accommodation, make them pay through the nose for a diploma, only to find that the vacancies don't really exist. Repeat every year.

A good number of job ads are only there to legitimize the appointment of someone who is already doing the job in an "acting" capacity. Many companies have "processes" whereby they can't just appoint someone, it has to be advertised externally.

And all the ones that are just dummies and scams, and the ones that the recruitment bods run pretty much permanently.

The recruitment industry has a lot to answer for, too.

You could add another category there; the people who don't want to work because the difference between doing nothing and getting dole is not worth busting your gut actually working. 2 options there: increase wages or drop benefits. People talk about Singapore having productive workers; it's not because they are naturally more hard working, it is because if they don't work they don't eat.


It would appear Business's claims that they can't find skilled NZers is a complete furphy. One look at NZ's Labour Market Statistics shows approximately none of them have been increasing wages to "attract staff". And meanwhile the government panders to them by opening the immigration floodgates.

Agreed, inflation adjusted wage growth is the only meaningful way to measure aggregate labour demand.

Very confused by this:
"...inflation is 0.2%...inflation is set to jump back to 1% in the December quarter."
My question would be does a 0.8% jump in inflation seems likely given recent inflation trends? Is it a sustainable rate even if this jump somehow does happen?


When do we start asking the hard questions? What if productivity is maxed out? What if the slaves are already at maximum output? How do we ensure everyone enjoys these so called higher standards of living whether they be a cleaner or a doctor? What if the next improvement in the standard of living is actually working less hours? How does continuously increasing the cost of these standards of living achieve anything?

When do we actually define what higher standards of living are? What is a minimum standard of living that anyone should be entitled to?

What we have here is a failure of humanity. Corrupted by greed and New Zealand is getting worse. When do we question the narrative of economic growth, wealth and the concept of competing against each other when there is enough for everyone?

I have found that asking hard questions can lead to unpleasant accusations.

It is human nature to try and improve your situation.
That hasn't changed since Adam was a cowboy.
Not going to change anytime soon

That's an overly generalised statement. Pretty sure that for thousands of years humans were happy to just 'be'.
It's probably since agriculture happened that 'society' as such, changed, and the concept of greed took hold.

Well communist states didn't last very long did they?
The brown stuff always floats to the top of the pond.

Ummmm, China and please do not try and claim it is not Communist, it is.


Really? How do you define communism? China is repressive and dictatorial,but no longer communist if you accept that classically,communism involves all property being held in common and being classless. I doubt if Marx or Engels would be impressed by present day China.

I may well define communism as something different from how it seems to manifest itself, and on that would argue it has never actually been properly tried as a political system in any country, other than maybe Cuba. However, China refers to themselves as a communist state and is run by a one party government, that party being the Chinese Communist Party.
I can't help it if people assume totalitarian is automatically communist. It is probably because they cannot bear the idea that anything right wing can be extremely authoritarian. I would also argue that North Korea is just an uber authoritarian state, not truly communist. If Kim Jong Un lived the same lifestyle as his people then maybe they would be.
All China has shown is that you do not have to be totally insular to be "communist" and btw all land is held in common, you might get to own houses but can't own the land under them.
The problem for countries choosing a more collective way of doing things, ie Venezuela, is that other countries like the USA put the screws on them, so they struggle to survive.

Damn lies and statistics. That is what GDP represents to the core.

"So perhaps all of the discussions about GDP being below potential GDP and fretting about sub-par economic (GDP) growth are really simply a reflection of the fact that GDP is really no longer the best measure of economic performance, economic growth and economic well-being in the Information Age? 

Thanks to the advances in computer technologies, the Internet and smartphone apps, consumers are getting more and more services like GPS for free (or at a significantly reduced cost compared to the past) today and displacing services that used to get accounted for as market-based production (maps and road atlases). In past decades like the 1950s, maybe economic output measured by GDP was a pretty good measure of both economic performance and economic well-being. In 2016, that may no longer be the case."

That and chasing low wage industries like tourism.

Too many employers screwing over their staff with the whole 'do more with less philosophy'. Immigration keeping wages down. Have been trying to change jobs myself for months but it is bloody hard. Suspect the employment picture is not as rosy as it appears.

Johnny T,

If you look at the highest growth components of GDP - Real estate commission fees and prisons - that's where the employment action is.

Sadly - neither is going to make us wealthy in the longer term.

Would you take a job if you were offered $9.00ph and told like it or lump it? But of course the unemployed are all druggies. One hundred years ago Henry Ford knew what to do when he wanted to increase his sales. He gave his employees a massive increase in wages

I see this in the NZHerald:

Grant Robertson: training levy not part of crackdown on migrant labour

Robertson denied the levy was aimed at penalising the use of migrant workers instead of New Zealanders.

Why deny it? Have they learned nothing from Trump? Denying it is not going to earn you points, you're just going to come across as wishywashy.

According to the NZHerald Robertson did say this though:

"Most the business organisations we talk to already commit to training and, actually, they are quite pi%%ed off with those other businesses who coat-tail off them."

Bad language? So he has learned something:

Why Donald Trump Is Smart to Swear

The young, renters and unemployed have always missed out...why the news head line?

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