Thursday’s HLFS showed that employment continued to increase against all market expectations of a marked fall in total employment based on other surveys such as the QES and QSBO [1].  Furthermore, both participation and unemployment continued to rise in the December quarter, making our interpretation of the survey, once again, quite difficult.

Employment increased sharply in the December quarter to the highest level of employment recorded since the Household Labour Force Survey began. In a seasonal pattern sense, last Thursday’s employment growth figure was somewhat normal, as employment data usually shows a spike in December quarters (highlighted in blue below).  However, this rise was more than usual for a December quarter and so the seasonally adjusted estimate of employment rose by a robust 0.9%.

Fig 1: Total employment

Data Table for Fig 1

Source: Statistics New Zealand

So what drove the large increase in employment? We saw that both part-time and full-time employment increased in the December quarter. However, part-time employment surged by 3.5% in the quarter and full-time employment rose by only 0.4%, dropping average hours per worker to a new historic low.

Looking at employment broken down by industry by full-time and part time, compared to year ago the largest gains in full-time employment have come from education (up 7,400), food retailing (up 5,100) and personal and household good retailing (4,200).  While the largest gains in part-time employment were driven by increases in food retailing (7,400), community services (up 7,000) and business services (up 5,000).

Digging into the data a bit more, we see that both participation and employment of older workers increased significantly in Q4, and this was largely driven by older males aged 65 years and older (figure 2 and 3).  Perhaps this could be explained by the recent pressure on household’s budgets given the substantial increases in the cost of living; forcing people into working or perhaps driven by tax cuts in October.  Another plausible argument (as sited by BNZ) for older people taking part in employment could be due to the fact that a lot of nest eggs will have been smashed over the last 6 months.

Fig 2: Quarterly employment change for older workers: 65 years and over

Data Table for Fig 2

Source: Statistics New Zealand

Fig 3: Participation rate of older workers

Data Table for Fig 3

Source: Statistics New Zealand

On some occasions, labour market analysts prefer to use the employment rate as a better measure of labour market tightness than the unemployment or participation rates (because the boundary between work and not work is clearer than between unemployment and not in the labour force).  The employment rate, the proportion of the working-age population in work, rose to 65.9% [2] in the December 2008 quarter, which was the second equal highest level ever recorded.

Fig 4: Employment rate: Seasonally adjusted

Data Table for Fig 3

Source: Statistics New Zealand

For both employment growth and the employment rate, the December 2008 quarter is likely to be a peak in this cycle reflecting either a lag from the economic downturn or quarterly volatility in the HLFS. Using annual average figures to reduce quarterly volatility, employment growth slowed to 0.6% in the year 2008, the lowest since 1999. Falls in employment in 2009 are likely based on hiring intentions falling to 17-year lows in late 2008.

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[1] The three surveys can show different trends as they have differences in terms of timing, the industries they cover and how they measure employment changes.

[2] Data is consistent with HLFS numbers after rebase