New Zealand’s unemployment rate rose to 5.3% in the September quarter, from a surprisingly low 4.0% in the June quarter. The result was close to market forecasts, and significantly better than expected by the Reserve Bank of New Zealand (RBNZ).
The economy’s rapid rebound from the Covid-19 lockdown means that unemployment is likely to plateau at much lower levels than initially feared.
Weekly increase gradual
The Household Labour Force Survey (HLFS) in the previous quarter was affected by the Covid lockdown, which made it impractical to actively look for work.
Further questioning by Stats NZ suggested a more comparable unemployment rate of 4.6% for the June quarter, with a gradual increase from week to week.
The September quarter does not appear to have been affected in the same way, despite the increase in alert levels in August. The unemployment rate showed no clear upward trend over the quarter, with the weekly unemployment rate bouncing around between 4% and 6%. (The margins of error can be large when the survey sample is broken down to this extent.)
The number of people employed fell by 0.8%, on top of a modest 0.3% fall in the previous quarter.
Quarterly Employment Survey
The Quarterly Employment Survey (QES) measures of filled jobs and FTE employment showed similar declines. These measures were weaker than the previously published Monthly Employment Indicator (MEI), which had suggested a substantial rebound in filled jobs since the lockdown in April.
Hours worked rose by 9.4%, reversing most of the 10.2% drop in the previous quarter. This adds to the evidence that the New Zealand economy bounced back readily as the Covid lockdown was lifted, and that the renewed restrictions in August had a relatively muted impact on activity and employment.
Stronger wage growth
Wage growth was a little stronger than we forecast, with the Labour Cost Index (LCI) rising by 0.6%. As we expected, wage increases have been hard to come by in the cost-Covid environment – only half of all roles received a pay increase at all in the last year, the lowest share in at least a decade.
However, there may have been some particularly large pay increases at the top end of the scale that dragged the average higher (but not the median).
While Covid-19 has been a major shock to the New Zealand economy, strong government support and the rapid elimination of the virus has meant that the impact has been much less severe than was initially feared. The wage subsidy scheme has now largely expired, with no obvious acceleration in job losses in that time. Today’s results strengthen our view that the unemployment rate is likely to top out somewhere south of 7%, a far cry from the early predictions of double-digit unemployment.
Michael Gordon is Senior Economist at Westpac Auckland.
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