The Household Labour Force Survey that surveys 15,000 households in New Zealand today reported an unemployment figure of 7.3% up from 6.8% in the June quarter and compared to expectations of around 6.7%. The unemployment rate has ranged between 6.4% and 6.8% over the last two years and despite a general feeling that the economy has slowed over the September quarter, the view was that the rate would at least be stable. Of the 2.22m people in the workforce, the data indicates that there are fewer full-time workers and that there is significant spare capacity in the labour market overall. Of particular concern is that the rate of unemployment amongst youth aged 15-24 is rising while employment in professional, scientific, technical and support services recorded a material fall. There is and will continue to be, some offset from the Canterbury rebuild but it appears that the loss of momentum in the rest of the economy is the dominant factor.
The unemployment rate also exceeds the Reserve Bank (RBNZ) forecast of 6.7% so the market will again question the future path of the OCR. If the unemployment rate is considered alongside of weakening business sentiment in various sectors then a delay in any OCR rise is probable while a reduction could be back on the agenda. Any reduction would also have the benefit of potentially bringing down a strong Kiwi dollar but could also add further fuel to the property “fire” that is starting to build in Auckland. The RBNZ has a tough balancing act!
Consistent with many offshore economies, New Zealand is recording positive but lacklustre growth and is struggling to create an environment for renewed jobs growth. Particular casualties of this anaemic growth both here and offshore, are young people and nowhere is this more evident than across Europe where youth unemployment ranges as high as 30-40% in some countries. It seems clear once again that the process of debt deleveraging in the consumer and government sectors will be a long and painful process and will continue to hold back sustained growth and hence the confidence and commitment needed by companies to take on new labour.