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Trying to keep up with economic and labour market news (Image: Getty)
Trying to keep up with economic and labour market news (Image: Getty)

The BulletinJanuary 19, 2023

Is this… stagflation?

Trying to keep up with economic and labour market news (Image: Getty)
Trying to keep up with economic and labour market news (Image: Getty)

Employment and hiring intention indicators have arrived thick and fast this week and some economists think we’re past making line calls on what they mean for the year ahead, writes Anna Rawhiti-Connell in this excerpt from The Bulletin. To receive The Bulletin in full each weekday morning, sign up here.


Union renaissance may continue

Like me, you may feel like you’re on the end of an out-of-control ball machine following labour market, immigration and economic predictions at the moment. On one hand we have Trade Me data showing that advertised salaries and job ads are declining. We’ve then got Tuesday’s pretty awful business sentiment survey results that suggest hiring intentions for the year are down, all while labour shortages persist and the cost of living remains high. After a renaissance last year, unions may continue to be called to action unless, as BusinessNZ’s Paul MacKay suggests, wage growth keeps pace with the cost of living. Newsroom’s Andrew Bevan has a good run down on the year ahead for industrial action.

“Pretty much in recession already”

I headlined a Bulletin last year “The perverse bad news that is low unemployment”. Higher unemployment is a recessionary condition. We know hiring intentions will be an indicator of an upcoming recession and growing unemployment, a consequence. That is, in some ways, exactly what the Reserve Bank is looking for to get inflation under control. The New Zealand Institute of Economic Research business sentiment survey results (the pretty awful ones) have economists like Shamubeel Eaqub saying “I think we’re pretty much in recession already”.

“Stagflation on steroids”

A recession can not be technically qualified until we have two quarters of negative GDP growth, so June at the very earliest, but “recession-ish” or “recession vibes” have something of a self-perpetuating impact. Slowing business growth and the ongoing challenge of finding people to fill jobs, and therefore, the continued expectation of wage growth, prompted the BNZ to go beyond a mere “recessionary vibes” call and say it was “all starting to look like stagflation on steroids”. I’ve covered what stagflation is near the end of this explainer on recessions but it’s persistently high inflation, high unemployment and slowing growth.

Where will immigration settings land this year?

Across the Tasman, immigration is booming. Australian Treasurer Jim Chalmers said they now expect 2023 immigration to be much higher than the upwards of 235,000 people they originally forecast. As’s David Chaston writes, “they are moving decisively to address their skill shortage”. Here, we’re still getting daily news about sectors desperate for workers. The government’s green list reversal at the end of last year had some suggesting it was backtracking on its immigration rebalance policy and floodgates were opening. However, as BusinessDesk’s Jem Traylen writes (paywalled) in a good assessment of where immigration policy might head this year, “the threshold for getting both short-time work visas and work-based residency is still higher than it was pre-Covid.”

Keep going!