Labour Market Reports
Employment and Unemployment - September 2008 Quarter
Background
This report informs you about the Household Labour Force Survey (HLFS) results for the September 2008 quarter. The HLFS was released by Statistics New Zealand on 6 November 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.
HLFS results mixed but labour market continues to ease
The HLFS showed the labour market continued to ease over the September 2008 quarter, in line with other surveys. While employment rose by 0.1% over the quarter, the unemployment rate rose from 3.9% to 4.2%, the highest rate since the December 2003 quarter. The softening in the labour market in the September 2008 quarter reflects the economic downturn which has seen a contraction in GDP over the first half of 2008.
Over the first three quarters of 2008, we have seen relatively steady employment and participation but a rising unemployment rate. While today’s results should be interpreted as a softening of the New Zealand labour market, the easing is not as marked as many commentators expected (0.6% fall in employment and a rise in the unemployment rate to 4.3%). The economic outlook has worsened significantly in recent months, however, and we expect the labour market to ease further as a result, albeit from a position of historical strength.
Employment relatively flat...
Employment rose by 0.1% to 2,172,000 in the September 2008 quarter (Figure 1). Over the first three quarters of 2008, employment has effectively been flat, rising by only 2,000. On an annual basis, employment has risen by 21,000, an increase of 1.0%. Both quarterly and annual employment growth have been driven by increases in full-time employment. In the past year, full-time employment has increased by 1.4% while part-time employment has fallen by 0.3%.
In the September 2008 quarter, female employment rose by 8,000 (0.8%) to 1,015,000, the highest level of female employment since the HLFS began in 1986. This increase was offset by a 0.4% decrease in male employment.
Total hours worked declined by 0.9% in the September 2008 quarter causing average weekly hours per worker to fall to 33.5. This is the lowest figure recorded in the HLFS and may signal that firms are holding on to staff but reducing their hours in response to weaker demand.
Fig 1: Employment growth
Fig 2: Unemployment & participation rates
... as the unemployment rate continues to rise...
The unemployment rate increased from 3.9% in the June 2008 quarter to 4.2% in the September 2008 quarter. This is the highest rate since December 2003 and is the first time since June 2004 that the unemployment rate has been above 4%. While the unemployment rate has risen by 0.8 percentage points since the December 2007 quarter, this has been from a record low of 3.4%.
The increase in the unemployment rate over the September 2008 quarter has been driven by both males and females. The female unemployment rate rose slightly from 4.0% to 4.1%, while the male rate increased from 3.9% to 4.2%. This is the first time since 2001 that the male unemployment rate has exceeded the female unemployment rate.
New Zealand’s unemployment rate is the eighth equal lowest of the 27 OECD nations with comparable data. Norway continues to have the lowest unemployment rate at 2.4%, with the Netherlands and Denmark also below 3.0%. In the United States, the unemployment rate has risen from 4.7% in November 2007 to 6.1% in September 2008, while Australia has so far been relatively unaffected, with their unemployment rate rising from 3.9% in February to 4.3% in October 2008. The OECD average unemployment rate was 6.0%, up from 5.7% when the June 2008 quarter HLFS was released.
... and the participation rate reaches an equal record high
The labour force participation rate rose from 68.6% to 68.7% in the September 2008 quarter. At 68.7%, the participation rate is the highest on record, equal with the March and June quarters of 2007. The labour force participation rate remaining high as the labour market eases is somewhat surprising as it usually declines as job opportunities fall. However, it is possible the high cost of living has put a strain on household budgets and people are being forced to remain in the labour force.
The slight rise in the participation rate over the quarter was driven by an increase in the female participation rate. The female participation rate rose by 0.4 percentage points to 62.6%, the highest on record since the survey began in 1986. The male participation rate fell 0.4 percentage points over the quarter to 75.0%.
Employment growth has slowed across a range of industries over the past year
Industry employment trends were mixed, with employment higher in nine of the fourteen industries compared to a year ago (Figure 3). Strong annual growth was recorded in public-sector dominated industries such as education (up 4.6%) and health & community services (up 3.5%), but also in transport & storage (up 4.1%) and manufacturing (up 2.8%).
The main negative contributions to employment over the past year came from the primary sector and accommodation, cafes & restaurants. Employment fell by 12,000, in the primary sector, which constitutes an 8% decline. Falling employment in hospitality, which decreased by 10%, is likely the result of the slowing of consumer spending and the weakness seen in tourist numbers. There has also been a marked decline in the finance & insurance industry (down 6%). Following a strong fall in the year to June 2008, employment in the construction industry has remained relatively flat. However, employment in trades occupation decreased by 9% in the past year.
Employment growth is expected to remain weak in the year ahead. The October 2008 National Bank Business Outlook showed negative employment intentions in all five sectors of the economy, particularly in construction, manufacturing and retail trade.
Unemployment remains particularly low in the South Island
Regional unemployment rates continue to remain low, with 11 of the 12 regions below 5% unemployment in the year to September 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 2.3%1. Gisborne/Hawke’s Bay had the highest unemployment rate at 5.1% in the year to September 2008 (Figure 4).
Fig 3: Employment growth by industry
Fig 4: Unemployment rates by region
Ethnic unemployment rates
Statistics NZ has changed the way it reports ethnicity data in the HLFS for the September 2008 quarter. Up until now, ethnicity data from the HLFS have been reported using a prioritisation process that assigns one ethnic group to people who choose more than one ethnic group. Instead, ethnicity data is now presented using the single/combination output method. Those who select one ethnicity will be allocated to that single group (eg, Maori only) and those who select more than one ethnicity will be allocated to that combination (eg, European/Maori) when sample sizes are large enough to produce robust results, or to catch-all categories when they are not (i.e. two or more groups not elsewhere included). This means that historical comparisons for some ethnic groups are not possible.
The annual average unemployment rate is highest for the MELAA2 Only group (11.7%) followed by Maori Only (8.9%), Pacific Peoples Only (7.1%), European/Maori (6.3%) and Asian Only (5.3%). The lowest rate is for European Only (2.8%). Using total response data, it is possible to look at all Maori. The annual average unemployment rate in September 2008 was 7.7% for Maori, the same rate recorded in the previous quarter and a year ago.
Summary
A further softening in the New Zealand labour market during the September 2008 quarter reflects the downturn in the wider economy. Factors such as high interest rates, a strong exchange rate, rising petrol prices, and drought contributed to a weakening of the New Zealand economy over the first three quarters of 2008 and this has flowed through to low employment growth and higher unemployment. The fall in hours worked in today’s figures points to a continuation of economic weakness in the September quarter after the declines in real GDP in the March and June 2008 quarters (September quarter GDP data are due on 23 December).
Employment has been largely flat since the start of 2008, the unemployment rate has risen to a 5-year high, net migration inflows remain relatively low, and wage growth is currently high but has been eroded by higher consumer price inflation. Nevertheless, labour market conditions are still robust relative to the same point in the previous major downturn (around early 1998). In particular, the current unemployment rate of 4.2% compares with 7.1% in the March 1998 quarter and the current labour force participation rate of 68.7% compares with 65.5% in the March 1998 quarter. Largely as a result of this elevated participation rate, the employment rate (proportion of working-age people in work) of 65.8% is higher than any rate prior to 2006 and well above 60.8% in the March 1998 quarter.
Underlying today’s figures is the question of the effect of global financial events. The most recent global financial turmoil is unlikely to have had a major bearing on today’s figures as it began late in the September 2008 quarter and will take time to work through the economy. Although there continues to be much uncertainty about the outlook, the labour market is generally expected to weaken further in late 2008 and into 2009. The National Bank Business Outlook for October 2008 showed that a net 21% of firms expected to lower their staff numbers in the coming year, the worst reading since the series began in 1993.
Today’s figures were relatively stable and close to our expectations compared with the volatile and unpredictable results of recent quarters. However, the volatility seen in the first half of 2008, when employment fell 1.3% in the March quarter and rose 1.2% the next quarter, could reassert itself. It will continue to be important to look at broad trends in coming quarters (rather than focus on quarter to quarter changes) and to examine other data to ensure they are telling a consistent story.
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 September 2008, 49% of these people were retired, 19% were studying, 16% 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 (68.7%).
- Unemployment rate:
- proportion of the labour force that is unemployed (4.2%).
- Employment rate:
- proportion of the working-age population that is employed (65.8%).
Note: figures may not sum due to rounding.
Endnotes
[1] Regional, ethnic, and age data are not seasonally adjusted and are averaged over a year to reduce seasonal variation and sample error.
[2] MELAA – Middle Eastern, Latin American and African.
