Labour Market Reports
EMPLOYMENT AND UNEMPLOYMENT - JUNE 2008 QUARTER
Background
This report presents the Household Labour Force Survey (HLFS) results for the June 2008 quarter. The HLFS was released by Statistics New Zealand on 7 August 2008. All figures refer to the working-age population (15 years and over) and are seasonally adjusted unless otherwise specified. Terms are defined in the appendix.
Labour market conditions mixed…
The June 2008 quarter HLFS showed the labour market has softened over the first half of 2008. Employment rose by 1.2% over the quarter reversing the weakness in the March 2008 quarter. Between the March and June quarters, the unemployment rate rose from 3.7% to 3.9%, while the labour force participation rate increased from 67.7% to 68.6%.
Employment results were much stronger than market expectations. Similar to the March quarter, the variation in employment appears to be caused by fluctuations in female employment. While last quarter the large decline was due to 23,000 women leaving full-time employment, this quarter much of the growth was due to around 15,000 women entering full-time employment.
As the HLFS data has been volatile from quarter to quarter recently, we advise looking at the first half of 2008 as a whole. This shows relatively steady employment and participation but a rising unemployment rate. While this should be interpreted as a softening of the New Zealand labour market, the easing is perhaps not as strong as initially thought after the March 2008 quarter results. Looking forward, the Department expects the unemployment rate to continue to rise over the second half of 2008 as a result of a slow down in economic growth.
…as employment rose…
Employment rose by 1.2% to 2,169,000 in the June 2008 quarter reversing the 1.3% decline in the March 2008 quarter. The March result was the largest quarterly decrease since the March 1989 quarter (Figure 1). While quarterly data shows growth in the June quarter, it is interesting to note that on an annual basis employment growth has been weaker, growing by only 0.7%.
Female employment has continued its pattern of volatility over the last few years. In the March quarter female employment fell by around 20,000, with female employment in this quarter increasing again by 19,000. For males, June quarter employment grew by 8,000 reversing the decline of 8,000 seen in the March quarter.
Fig 1: Employment growth
Fig 2: Unemployment & participation rates
Total employment rose by 27,000 people over the June 2008 quarter, while unemployment rose by 7,000. With both statistics rising, this means that the labour force has grown, up by 33,000 in the June 2008 quarter. The rise in unemployment is consistent with an easing in skill shortages in the first half of 2008, albeit from very high levels.
Total hours worked rebounded by 2.3% in the March 2008 quarter, the equal largest quarterly increase since 2000. As hours worked rose by more than the rise in employment, average weekly hours per worker rose to 33.9. This rise in total hours worked is broadly positive indicator for economic activity over the quarter, although the early timing of Easter was also a contributory factor.
… while the unemployment rate increased slightly …
The unemployment rate increased slightly from 3.7% in the March quarter to 3.9% in the June 2008 quarter. This was largely driven by the male unemployment rate rising from 3.5% in March 2008 quarter to 3.9%. The female unemployment rate rose slightly from 3.9% to 4.0% over the same period. While the unemployment rate has grown over each of the last two quarters, this is an increase from the lowest unemployment rate ever recorded in the HLFS. The unemployment rate has been relatively stable since falling below 4% in the second half of 2004.
With the unemployment rate within half a percent from the lowest recorded in the survey, the number of people available and actively seeking work but not being able to find it remains very low. Long-term unemployment (i.e. those unemployed for longer than six months) fell to 10,400 for the year to June 2008, down nearly 1,000 from the year to March 2008. This is the lowest number ever recorded on an annual average basis.
New Zealand’s unemployment rate continues to be very low by international standards and presently is the sixth lowest of the 27 OECD nations with comparable data, and is one of only six countries below 4.0%. Norway continues to have the lowest unemployment rate at 2.5%, with Denmark, the Netherlands, South Korea, and Switzerland the other countries below 4.0%. The OECD average unemployment rate was 5.7% in the March 2008 quarter, with Australia having an unemployment rate of 4.3%.
…and the participation rate rose
Due to a 1.5% increase in the labour force, the labour force participation rate rose from 67.7% in the March 2008 quarter to 68.6% in the June quarter. This increase completely reverses the decline seen between the December 2007 and March 2008 quarters. The June 2008 quarter results is within 0.1 percentage points of the record high participation rate, recorded in the March and June quarters of 2007.
The increase in the participation rate over the quarter was a result of both the female and male participation rates increasing. Both the male and female participation rates reversed the declines seen in the March quarter. The female participation rate rose to 62.1% which is almost equal the record high of 62.2% reached in the December 2007 quarter. The male participation rate rose by 0.8 percentage points to reach 75.4%, the same as the December 2007 quarter, and just behind the record of 75.8% recorded in March 2007.
Employment growth has slowed across a range of industries over the past year
Employment patterns across industries were mixed. In the June 2008 quarter, employment was higher than a year earlier in eight of the fourteen industries, with the strongest annual growth seen in industries such as transport and storage (up 6.6%) and wholesale/retail trade (up 2.4%), and in public-sector dominated industries such as education (up 2.3%) and health and community services (up 2.0%). Employment growth in wholesale/retail trade has slowed as consumer spending eased, but has not yet turned negative.
The main negative contributions to employment over the past year came from construction and accommodation, cafes and restaurants. The fall in construction employment reflects the slowing of residential investment. Over the past year, employment fell by around 10,000 in the construction industry, which constitutes a 5% decline, and was also reflected in a large fall in employment in the trades occupations. Falling employment in hospitality is likely the result of the slowing of consumer spending and the weakness seen in tourist numbers.
Employment growth is expected to remain weak in the year ahead. Although the July 2008 showed negative employment intentions in all five sectors of the economy, the most negative intentions where in areas we would expect, including construction and retail trade.
Regional results remain strong
Regional unemployment rates continue to remain low, with each of the 12 regions below 5% unemployment in the year to June 2008. Unemployment rates were particularly low in the South Island with all regions below the national average, with Southland the lowest in the country at 2.1% [1]. Manawatu-Wanganui had the highest unemployment rate at 4.8% in the year to June 2008. The largest fall in the unemployment rate between the years to June 2007 and 2008 occurred in Wellington (4.1% to 3.5%) (Figure 3).
Fig 3: Unemployment rates by region
Fig 4: Unemployment rates by ethnicity
Ethnic unemployment rates remain low while participation declines
The annual average unemployment rates for Pacific peoples (6.3%) fell by 0.7 percentage points between the year to June 2007 and 2008, while data for Maori (7.7%) and Europeans (2.6%) remained relatively stable (Figure 4). The unemployment rate for the ‘Other’ ethnic group on the other hand fell from 5.8% to 5.6%.
Annual average labour force participation rates rose for all ethnic groups with the exception of Europeans. The participation rate of Pacific Peoples, in particular showed strong growth, up 0.8 percentage points between the year to June 2007 and 2008 to 63.6%. The Maori participation rate rose slightly, up 0.2 percentage points to 67.8%. The decline in the European rate was relatively small at 0.2 percentage points to 69.4%, still near the historic high reached over the last two years.
Summary
Results seen in the June 2008 quarter release are more robust than market expectations. The strength of the employment data shows that while the economy has slowed over recent periods, the ongoing skill shortages mean that there has not been a marked impact on the number of people employed. While skill shortages are receding, there is still a large share of employers whose growth is constrained by lack of skilled staff.
The fluctuation of female employment is not necessarily a negative characteristic. It does appear that there is significant opportunity for women to enter and leave employment as desired. This may well be due to second income earners within families making decisions based upon family finances. As additional funds are required, there is the opportunity for these individuals to earn more. This flexibility can be seen as a sign of a mature labour market.
The latest HLFS results show a strong rebound in some of the key labour market indicators in the June quarter, particularly employment and labour force participation, after the fall in the March quarter. Taken as a whole, the HLFS results in the first half of 2008 are consistent with the slowdown in the wider economy. We anticipate that the labour market will continue to weaken during the remainder of 2008 as a result of the general economic slowdown.
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 June 2008, 49% of these people were retired, 19% were studying, 17% were at home with children, and 12% were at home not looking after children.
Labour force participation rate: proportion of the working-age population that is in the labour force (68.6%).
Unemployment rate: proportion of the labour force that is unemployed (3.9%).
Employment rate: proportion of the working-age population that is employed (65.9%).
Note: figures may not sum due to rounding.
[1] Regional, ethnic, and age data are not seasonally adjusted and are averaged over a year to reduce seasonal variation and sample error.