Bernard Hickey breaks down the numbers released today.
The news was worse even than expected today when Stats NZ announced an unemployment rate of 5.6% – the highest for 11 years. “And it actually doesn’t look better under the hood, either,” said Bernard Hickey, economic commentator and author of The Kākā.
The quarterly data, which applies to the three months to the end of June, looked bleak across a range of measures. Annual wage inflation is 2%, losing a battle against 4.1% price inflation. The proportion of young people (15 to 24) not in employment, education or training (Neets) remained high at 13.8%. And “underutilisation”, which gauges the total untapped capacity in the labour force, grew to 13.8%, with long-term unemployment unbudging at almost one in five of the unemployed total.
The underutilisation proportion was especially dire for younger people (37% for 15- to 24-year-olds and 11.6% for 25- to 34-year-olds) and Māori (22.8%).
“This is a very bad result for the economy because not only is it more people out of work, the wage growth was just 2%,” said Hickey, on a new episode of At Large with Toby Manhire. It was especially dismal when you looked at the retail sector. “Retail is the one where people are spending the least, where there’s the most pressure, more people shutting down their shops and cafes and restaurants. Wages in retail have increased by 0%. There’s been no increase in real terms.”
It was, however, a particularly unpleasant three months, punctuated by global volatility including strikes in Iran, the closure of the Hormuz Strait and resulting spikes in the price of fuel. “But people hadn’t been feeling great beforehand, particularly consumers and households,” said Hickey.
“Because, remember, we’re four years in to falling house prices now. Not everyone owns a home, but about two thirds of households do … For a lot of people, they feel poorer, as well as maybe they don’t have a job, maybe their wages have been flat. So there’s a double whammy going on there. Not only do you feel poorer, maybe you don’t have as much work as you want, but now you have less money in your pocket to spend on discretionary items.”
Job market numbers tend to be a “lagging indicator”, providing some confidence that these numbers, measuring the second quarter of the year, are as bad as it gets. In a statement that acknowledged “the second quarter of this year was a tough one”, finance minister Nicola Willis said today it was “encouraging to see recent jumps in business confidence and hiring intentions”.
“The trouble is, just after the end of June, the Reserve Bank put up interest rates, and that has hammered business confidence again,” said Hickey. The business confidence surveys did “seem to be at multi-year highs”, he said, but there was a less rosy result when you dug into the way people feel about their own business’s future – “a much more reliable indicator of what’s actually going to happen with the economy”.
For Hickey, there is a deeper structural challenge. “You’ve got an economy which just doesn’t know how to operate without house prices rising,” he said.
“I don’t think the government understands it. I don’t think the Reserve Bank or the Treasury understand it. Both have been forecasting a rebound in employment and lower unemployment for four years, and they’ve gotten it wrong every quarter.”
Hear more from Bernard Hickey on At Large with Toby Manhire, which you can find on your podcast feed: follow here for Spotify, or here for Apple. Or YouTube, if that’s your cup of tea: subscribe to the Spinoff here and find all the episodes here.
