Wage Growth - March 2011 Quarter - Archive
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Published: 3 May 2011
This note examines the wage growth measures for the March 2011 quarter from the Labour Cost Index (LCI) and the Quarterly Employment Survey (QES), which were released by Statistics New Zealand on 3 May, 2011. The LCI and QES both gathered data in the middle of February and therefore neither reflect the impact of February earthquake.
Wage growth picks up from low levels
The adjusted LCI (which measures changes in pay rates for a fixed set of jobs and excludes performance-related pay increases) rose by 0.5% over the March 2011 quarter lifting annual wage growth to 1.9%. This is up from 1.7% in the December 2010 quarter and a nine-year low of 1.5% recorded in the year to March 2010.
Wage growth appeared to reach its lowest point in the middle of 2010, lagging around 6 months after the trough of other labour market indicators, reflecting the infrequent nature of wage negotiations. The March 2011 quarter data confirms that wage growth is gradually recovering, albeit from very low levels. Figure 1 shows all of the three main wage growth measures have turned. Annual growth in the unadjusted LCI (which includes performance-related pay) increased to 3.6% in the March 2011 quarter, the fourth consecutive rise since it reached a low point of 2.5% in the March 2010 quarter (see Table 1). Annual wage growth in the QES[1] was 2.6% for the year to March 2011, up from a 16-year low of 1.1% in the year to June 2010.
Figure 1: Wage Growth Measures
The adjusted LCI showed annual wage growth in the public sector was 1.4% in the year to March 2011, up slightly from an 11-year low of 1.3% in September 2010. Private sector wages increased by 2.0% in the year to March 2011. This is up from 1.9% growth in the year to December 2010. By industry, annual wage growth was strongest in professional, scientific, and technical services (up 2.9%) and Petroleum, chemical, polymer and rubber product manufacturing (up 2.7%).
| Wage Growth | Last year | Last quarter | This quarter |
|---|---|---|---|
| (annual % change) | March 2009 | December 2010 | March 2011 |
| Adjusted LCI | 1.5 | 1.7 | 1.9 |
| Unadjusted LCI | 2.5 | 3.6 | 3.6 |
| QES | 1.1 | 1.9 | 2.6 |
Source: LCI, QES, Statistics New Zealand.
Filled jobs rise
Filled jobs in the QES (seasonally adjusted by the Department of Labour) rose by 0.6% in the March 2011 quarter after falling by 0.8% in the December 2010 quarter. Seasonally adjusted full-time-equivalent jobs rose by 1.2% over the quarter, reflecting a larger increase in the number of full-time jobs. Seasonally adjusted paid hours also rose (by 0.7%) after a fall (by 0.2%) in the December 2010 quarter. While the QES and the Household Labour Force Survey (HLFS) do not always match closely from quarter to quarter, the increase in filled jobs suggests that employment in the HLFS will grow moderately in the March 2011 quarter (results will be released on 5 May).
The Department of Labour expects that the HLFS will show a moderate growth in employment over the March 2011 quarter, with the unemployment rate declining slightly. However, Statistics New Zealand was unable to survey households in Christchurch after the February quake. This means that the impact of the February quake will not appear in any of the official labour market statistics until the June 2011 quarter.
On an annual basis, filled jobs fell by 0.2%, down from a 0.4% fall seen over the year to December 2010. Compared to the March 2010 quarter, 9 out of the 16 industries surveyed recorded a rise in filled jobs. Growth in electricity, gas, water and waste services (up by 9.3%), forestry and mining (up by 6.9%), transport, and postal & warehousing (up by 5.8%) were offset by weakness in accommodation & food services (down by 9.2%), rental, hiring and real estate services (down by 7.9%), and arts, recreation and other services (down by 4.7%).
Wage growth to gradually recover over 2011
The March 2011 quarter results confirm that wage growth reached its trough in the middle of 2010 year and began to recover. In the short term, wage growth is likely to remain subdued over 2011, as unemployment remains elevated and economic growth remains weak. However, the labour market shows signs of increased labour demand, skilled labour has become harder to find and economic activity is anticipated to increase from late 2011 and strengthen in 2012. We expect wage pressures to increase later in 2011 and wage growth to pick up over the next two years given the usual lag between wage growth and skill shortage.
Author or contact details
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