Labour Market Update - November 2010
Published: November 2010
The labour market improved more than expected…
The Household Labour Force Survey (HLFS) showed that labour market conditions improved strongly over the September 2010 quarter. Employment rose by 1.0% and the unemployment rate fell from 6.9% to 6.4%. The September 2010 quarter results confirm that the unemployment rate has reached its peak and the labour market recovery is well under way. The number of people employed has risen by 39,000 since it reached its trough in the second half of 2009.
…as employment rose strongly…
The number of people in employment rose by 1.0%, or 23,000 people, over the September 2010 quarter (see Figure 1). This consisted of a 13,000 (or 2.7%) increase in part-time employment and a 10,000 (or 0.6%) increase in full-time employment. On an annual basis, employment grew by 1.8%, the largest growth rate since 2007.
Fig 1: Employment Growth
Source: Statistics New Zealand
Fig 2: Unemployment Rate
Source: Statistics New Zealand
The rise in employment over the September 2010 quarter was driven almost entirely by a 1.9% increase in male employment with female employment up by only 0.1%. Over the past year, employment growth has been strongest in male-dominated industries such as agriculture, forestry & fishing (up 13,200) and electricity, gas, water, & waste services (up 4,600).
Total hours worked rose by 0.8% over the September 2010 quarter. This indicates that employers are now hiring new workers instead of just increasing the hours of existing employees.
…and the unemployment rate fell to 6.4%...
The unemployment rate fell from 6.9% to 6.4% in the September 2010 quarter. Although the unemployment rate has been volatile over recent quarters, looking at Statistics New Zealand’s trend series, the unemployment rate clearly peaked in the December 2009 quarter and has gradually recovered since then (see Figure 2).
The latest HLFS results show that there has been a significant divergence in labour market outcomes by gender. The male unemployment rate fell strongly, from 6.9% to 5.7%, while the female unemployment rate rose from 6.8% to 7.2% as more females entered the labour force but were unable to find work. This is the highest the female unemployment rate has been relative to the male rate since the HLFS began in 1986. Male unemployment appears to have fallen because the majority of new jobs have been created in male-dominated industries and because a large number of young unemployed males have left the labour force, perhaps choosing to enter study or training.
…while the labour force participation rate rose slightly...
The labour force participation rate increased from 68.1% to 68.3% over the September 2010 quarter as people were encouraged to enter the labour force on the back of rising job opportunities. Over the past year, the rise in labour force participation has been driven by those aged 50 years and over with their participation rate rising from 52.7% to 54.6%.
…although wage growth remains subdued…
Wage growth in the adjusted Labour Cost Index (LCI) (which measures changes in pay rates for a fixed set of jobs and excludes performance-related pay increases) was 1.6% in the year to September 2010, only slightly above the 9-year low of 1.5% recorded in the year to March 2010. Given the lag between wages and labour market conditions, the subdued growth in wages reflects the weakening labour market over 2009, which saw unemployment rise strongly. The low wage growth figures were the result of easing public sector wage growth while annual private sector wage growth rose slightly.
…but appears to be turning…
With unemployment having peaked and the labour market expected to continue improving over the next year, wage growth is expected to pick up, albeit from low levels. The unadjusted LCI (which includes performance-related pay) appears to have already turned, with annual growth of 3.1% in the September 2010 quarter, the second consecutive rise since it reached a low point of 2.5% in the March 2010 quarter (see Figure 3). Furthermore, it looks as though many wage freezes are coming to an end with 49% of people receiving a pay rise in the year to September 2010, up from 43% in the year to March 2010.
Fig 3: Wage Growth
Source: Statistics New Zealand
Fig 4: Employment Intentions
Source: National Bank.
…with the labour market expected to recover further over the next year
The September 2010 quarter HLFS showed that the labour market improved strongly over the third quarter of 2010 with the results well above market expectations. While we believe the labour market is slowly recovering, labour market data has been volatile over the past year, and there is a chance that some of the strength seen in the September 2010 quarter may be reversed in the December 2010 quarter. This was certainly the case early in the year when a strong March 2010 quarter was followed by a weak June 2010 quarter. Nevertheless, the trend shows a labour market that has turned the corner and is improving.
We expect the labour market to continue to recover over the next year, in line with the Department’s Leading Indicator of Employment and growth in our Jobs Online indicator. According to the October National Bank Business Outlook, a net 7.6% of firms intend to increase employment over the next year (see Figure 4). Continued employment growth should see the unemployment rate continue to trend down, falling to around 6.0% in mid-2011.
