Employment & unemployment - March 2006

Last updated 12 May 2006

Background

This report informs you about the Household Labour Force Survey (HLFS) results for the March 2006 quarter. The HLFS was released by Statistics New Zealand on 11 May 2006. All figures are seasonally adjusted unless specified and terms are defined in the appendix.

Key points

Labour market conditions mixed, but remain strong…

The HLFS results were mixed, but strong overall. There was a large rise in the number of people in paid work and an even larger rise in the number of people participating in the labour force. Although the unemployment rate rose from 3.6% to 3.9%, this was caused by the large number of people entering the labour force rather than weak employment growth.

The HLFS registered high employment growth in the March 2006 quarter, exceeding market expectations (and our own). The rise was broadly in line with the Quarterly Employment Survey (QES) released on 8 May 2006. The increase in unemployment also exceeded market expectations due to the unexpectedly large rise in labour force participation.

…as employment growth strengthened, particularly full-time work…

Employment rose by 1.1% (23,000 people) in the March 2006 quarter, reaching 2,108,000, following no growth in the previous quarter. This lifts annual employment growth in the year to March 2006 to 2.6% (up 53,000), from 1.5% in the year to December 2005 (Figure 1).

Full-time employment (30 hours or more a week) was up 1.2% or 19,000 people and part-time employment (fewer than 30 hours a week) was steady in the March quarter.

Fig 1: Employment growth

Source: HLFS, Statistics New Zealand

Fig 2: Unemployment & participation rates

Source: HLFS, Statistics New Zealand

The strength of labour demand seen in the HLFS and QES are positive signs for economic growth in the March 2006 quarter after a 0.1% drop in Gross Domestic Product (GDP) in the December 2005 quarter (March 2006 quarter GDP is due for release on 23 June). Furthermore, the economy’s capacity to grow will have been supported by the increase in the supply of labour.

High employment growth in the March quarter may be a catch-up after no growth in the previous quarter. It may also be due to increased availability of labour allowing firms to expand as the rise in unemployment is consistent with the recent easing of skill shortages. However, although the tightness of the labour market has eased, it still remains very tight.

…and the participation rate rose to a record high…

The labour force participation rate (the proportion of the working-age population in the labour force) rose sharply to 68.5% in the March 2006 quarter (Figure 2). This is the highest rate ever recorded. The increase was mainly driven by female participation (which rose from 61.0% to an all-time high of 61.9%), although male participation also increased (from 75.2% to a 17-year high of 75.6%).

Annual working-age population growth was 1.4% at December 2005, down only slightly from 1.6% a year earlier because net migration inflows have stabilised after falling sharply between mid-2003 and late-2004.

…and the unemployment rate drops back to equal historic low

The unemployment rate fell from 3.7% to 3.6% in the December 2005 quarter (Figure 2). This is the equal lowest rate since the HLFS began in 1986 and is the lowest among the 27 OECD nations with comparable data, well below second placed South Korea at 4.1%. The unemployment rate across the whole OECD stands at 6.4%.

 

Table 1: Recent HLFS results

Labour market indicator	Jun 2005	Sep 2005	Dec 2005	Mar 2006
Working-age population (000s)	3,169	3,176	3,189	3,203
quarterly % change	0.3	0.2	0.4	0.4
Employment (000s)	2,067	2,085	2,085	2,108
quarterly % change	0.6	0.9	0.0	1.1
Unemployment (000s)	78	79	79	86
quarterly % change	-4.7	1.5	-0.6	9.9
Labour force participation rate (%)	67.7	68.1	67.9	68.5
Unemployment rate (%)	3.6	3.7	3.6	3.9

Source: Household Labour Force Survey, Statistics New Zealand

Working-age population growth was 0.4% in the March quarter and 1.4% in the year to March, driven by a moderately large net migration inflow at the end of 2005 and in the March 2006 quarter .

…while the unemployment rate rose from a record low

The labour force increased by slightly more than employment, and therefore the unemployment rate rose to 3.9% of the labour force in the March 2006 quarter from an equal 20-year low of 3.6% in the last quarter (Figure 2).

The unemployment rate rose from 3.1% to 3.6% for males, and from 4.2% to 4.3% for females over the March 2006 quarter. These changes reduced the gap between male and female unemployment.

New Zealand has the second lowest rate among the 27 OECD nations with comparable data, just above first placed South Korea at 3.6%. The rate across the whole OECD stands at 6.3%.

Despite the rise in unemployment, the employment rate (the proportion of the working-age population in work) rose to a record high of 65.8% in the March 2006 quarter because of the large increase in employment.

A transforming economy requires people to move from lower to higher value activity. This transformation must include the upskilling of workers in existing firms to take advantage of new opportunities. It must also minimise the disruptive effects of temporary unemployment, which have a direct negative impact on individuals and communities.

Employment growth based across several industries

Annual average economy-wide employment growth of 2.6% at March 2006 was mainly driven by a positive contribution from the primary sector (the first time since September 2002), a resilient construction industry, as well as growth in business & financial services and hospitality. This was offset by falling employment in transport & communications, manufacturing, and education.

Regional results are mixed but positive overall

The largest falls in the rate of unemployment between the years to March 2005 and 2006 occurred in Southland and Canterbury. Northland still has the highest unemployment rate of 5.4% in the year to March 2006, followed closely by Gisborne-Hawke's Bay at 4.9% (Figure 3). The lowest rates were recorded for Southland at 2.7% and Canterbury at 2.9%.

Fig 3: Unemployment rates by region

Source: HLFS, Statistics New Zealand

Labour force participation rates have increased in every region since the year to March 2005 with Northland having the biggest increase, up 3.7 percentage points.

Participation rate trends up for all ethnic groups

The unemployment rate for Maori was steady at 8.6% in the year to March 2006 (Figure 4). This is their equal lowest rate recorded since the HLFS began in 1986. The annual average unemployment rate for Europeans and Pacific Peoples rose slightly to 2.7% and 6.4% respectively.

Fig 4: Unemployment rates by ethnicity

Source: HLFS, Statistics New Zealand

The labour force participation rate for Maori has continued to increase. In the year to March 2006, a record high 67.1% of Maori were in the labour force, up 3.1 percentage points since September 2004. Maori participation rates were just short of European at 69.6% but above 62.7% for Pacific Peoples and 60.8% for the 'Other' ethnic group.

APPENDIX: Terms and definitions

The following is a list of the main terms that we use to describe the labour market, together with definitions of these terms. The table below illustrates how the terms relate to each other.

Working-age population

usually resident non-institutionalised civilian population aged 15 years and over.

Labour force

number of people who are either in work or are available and actively seeking work (that is, employed or unemployed as defined below).

Employment

number of people in work of one hour or more per week.

Full-time/part-time employment

full-time workers usually work 30 hours or more per week, and part-time workers usually work less than 30 hours per week.

Unemployment

number of people who are not in work, but who are available for and actively seeking work.

Not in the labour force

number of people who are not in work and are either not available or not actively seeking work (that is, they are not employed and not unemployed). For example, in the year to March 2006, 46% of these people were retired, 19% were studying, 17% were at home with children, and 11% were at home not looking after children.

Labour force participation rate

proportion of the working-age population that is in the labour force (68.5%).

Unemployment rate

proportion of the labour force that is unemployed (3.9%).

Employment rate

proportion of the working-age population that is employed (65.8%).

Fig 5: Labour Market Summary