Stats NZ has today released its labour market data for the three months to September, which shows an increase inline with most forecasts.
What’s all this then?
According to Stats NZ’s labour market data released this morning, New Zealand’s official unemployment rate has increased from 4% to 5.3% for the three months from July to September. This is consistent with various economists’ predictions that the rate would increase above 5%.
Looking at it another way, it shows that the seasonally adjusted number of unemployed people increased by 37,000 from last quarter to 151,000.
The underutilisation rate – or the unemployed plus the underemployed (those who are working part-time but would like to work more and are available to) – rose from 12% to 13.2%. Actual hours worked rose 9.4% since last quarter and average ordinary time hourly earnings rose to $33.81.
How bad is a 5.3% unemployment rate?
While it’s the largest quarterly rise on record, it’s certainly not as bad as was forecasted earlier this year. Back when Covid-19 first raised its ugly head, both economists and the Treasury had forecasted a much more daunting unemployment figure of more than 8% by the end of 2020, so this is a far more modest increase.
Brad Olsen, senior economist at Infometrics told The Spinoff the increase was at the lower end of most expectations and was a positive result all things considered. “It’s encouraging right? It reinforces that the labour market seems to be holding up in a much better regard,” he said.
Economists will also be happy that today’s data did not yield any bizarre surprises like last time. In early August, when Stats NZ released its June quarter labour market figures, they defied unanimous predictions and economic trends by showing an actual decline in the unemployment rate for 4.2% to 4%. The reason was that when calculating the data, Stats NZ differentiated between unemployment and “underutilisation” based on whether people were actually engaged in job hunting, or still being tied over on the government’s wage subsidy so couldn’t actively seek work. While the unemployment rate had gone down, underutilisation had increased significantly – many economists therefore said that this analysis actually masked the true impact on the labour market.
However, because the underutilisation rate had also increased significantly over the September quarter, Olsen said it showed that the impact of Covid-19 wasn’t simply measuring those who were out of work.
“It’s not just job losses we’re seeing come through from this economic shock. It’s also people working not quite as much and wanting to work more.”
He said his was the result of more businesses keeping staff on at reduced hours or casual contracts so that they could be ready for when activity and trade started to ramp up again.
So what’s caused the increase announced today?
Naturally it’s a combination of things related to New Zealand’s GDP decline of 12% and move into recession. With such a severe drop in economic activity, more people are bound to lose their jobs. However, the most consequential event was the several weeks New Zealand spent at higher alerts in August and September after Covid-19 re-emerged in the community. With Auckland at level three for almost three weeks and a river of trade slowing to a trickle, many businesses would have needed to make tough decisions around staffing.
To alleviate the pain, the government released another tranche of wage subsidy; two weeks’ worth for affected businesses. No doubt this softened the blow and has meant the rise in unemployment is much less than it might have been.
Are women still being disproportionally affected?
When Stats NZ released its June quarter date, it revealed a shocking figure that of the 11,000 New Zealanders that lost their jobs, 10,000 of them were women. That’s because the industries most affected by the first lockdown earlier this year were hospitality, retail and tourism – sectors that employ predominantly women. While New Zealand’s latest alert level rise would have affected the same industries, the statistic show that unemployment rates for men and women rose by similar amounts over the quarter – up 1.2 and 1.3 percentage points, respectively.
However, according to Stats NZ , when looking at the entire Covid-19 period from March to September, women have disproportionately fared worse than men. Over that seven-month period, the seasonally adjusted number of people in employment fell by 31,000 and over over two-thirds, or 22,000, were women.
What this shows is that the employment rate for women fell from 62.8% to 61.2% or 1.6% over the period, while rate for men fell from 72.8% to 71.8% or 1%.
As for underutilisation, the stats show that the seasonally adjusted rate increased by 84,000 between the March and September 2020 quarters with 48,000 more under-utilised women and 36,000 more under-utilised men.
Will the unemployment rate continue to increase?
Most certainly. While the outlook is still much better than initial forecasts, most economists are predicting unemployment to accelerate in the fourth quarter and throughout 2021 to peak at between 6.5% and 7.5% by the end of the year. Olsen said businesses are bound to being shedding more staff early next year as the true teeth of the recession start to bite.
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