Purpose

The labour market scorecard is a quarterly update of key labour market statistics and indicators, which provides an overall view of the state of the labour market.

Key points

The scorecard uses a growth accounting approach to support the Government’s focus on economic growth.

• The labour market recovery slowed over the December quarter with the unemployment rate rising to 6.8%.
• Employment fell due to a drop in part-time jobs, following stronger than expected job growth in the September quarter.
• Labour market conditions remain difficult for youth and for Māori, Pacific and Asian ethnic groups.
• We expect moderate employment growth over the coming quarters, along with slowing migration, to push down the unemployment rate.

What each scorecard dial shows

Labour demand dial: employment worsened

Employment fell due to a large drop in part-time employment. There was solid employment growth in manufacturing, but weak demand in Finance & Insurance, Education & Training, and the primary sector.

Hours worked rose by 0.2% indicating that firms are increasing the hours of their existing staff before taking on new workers. This is consistent with a continuation of the gradual economic recovery.

Labour market matching dial: unemployment rose to 6.8%

The fall in employment drove the unemployment rate up from 6.4% to 6.8%. Unemployment rates for Māori, Pacific and Asian ethnic groups have remained high through the past year. Youth unemployment fell from 18.4% to 16.8%. While unemployment has trended down during 2010, the number of long-term unemployed has gone up, reflecting the ongoing impact of the recession on people who lost their jobs in 2009.

Labour supply dial: participation falls

Labour force participation fell in December, but has been strong throughout the recession and into the recovery. Many young people are remaining longer in school or entering tertiary education and so their patterns of entry into the labour market have been unusual.

There has been an increase in participation by older people throughout the recession, which has been largely matched by an increase in employment.

Net migration has eased over the past few months and is well down from the highs of a year ago. Net migration had been expected to continue easing over the coming months, with increased departures to Australia and a slowdown in arrivals, but the recent severe weather events in Australia may delay some departures.

Labour quality dial: are the right skills available to support high value jobs?

The number of people working in skilled occupations has steadily increased over recent years, along with the qualification levels and skills of the workforce.  The number of university graduates in the workforce has increased dramatically over the past ten years.

High levels of participation in workplace-based training and other parts of the tertiary education sector are also increasing workforce skills.  Even so, there were widespread skill shortages prior to the recession, which are expected to resurface as the economy recovers.

Workplace performance dial: high quality jobs that add value and boost earnings

Annual wage growth rose slightly to 1.7% in the December 2010 quarter, up from the nine-year low of 1.5% in the year to March 2010. Wage growth usually lags employment growth and the low level of wage inflation therefore reflects the weakening labour market over 2008 and 2009.

Capital investment dial: firms’ investment in plant, machinery, equipment and other assets (excluding investment in residential housing) will support employment growth over the next two years

Capital investment was flat in the September quarter, as falls in construction investment were balanced by a rise in plant and machinery investment. A strong recovery is forecast in the following two years.  A rebound in capital investment will help New Zealand businesses take full advantage of the economic recovery.

Short-term outlook

The fall in employment surprised most commentators, with some suggesting the economy may again be in recession. While strong vacancy growth and employment intentions paint a more positive picture, it seems likely that the pace of recovery has slowed. While we still expect the labour market to improve over the coming quarters, these conditions often produce unusual labour market patterns and we expect to see continued volatility in the data.