Mid-March 211 Labour Market Slowly Tightening Up Welcome to the first edition of our new monthly publication looking at the state of the labour market in New Zealand and where we expect things to go. We commence by looking at the state of the labour market in terms of official data released by various NZ government agencies starting with Statistics New Zealand. Every three months Statistics NZ survey 15, people asking them whether they have a job and what industry it is in, whether they want a job, and so on. The results are released in the Household Labour Force Survey and this is what the data for the December quarter released in the first week of February told us. In the past ten year s NZ s unemployment rate has averaged 4.8%, it hit a quarter of a century low of 3.5% in 27 and now stands at 6.8% having come down only a bit from 7% reached in 29 as the economy was struggling to recover from the 28 recession and the 28/9 global financial crisis. In contrast the UK unemployment rate has averaged 5.8% and Australia s 5.4% over the past ten years. 9. 8. 7. 6. % UNEMPLOYMENT RATES United Kingdom 5. 4. 3. 2. New Zealand Australia 1.. Sources" Statistics NZ, ABS, ONS 1 2 3 4 5 6 7 8 9 1 In New Zealand the unemployment rate has traditionally been lowest in the most southern and northern parts of the South Island Southland and Nelson etc., and highest in the far north and east of the North Island Northland and Bay of Plenty / Gisborne / Hawkes Bay Region Latest Ten Year Average Northland 8.9 7. Auckland 7.8 4.9 Waikato 6.1 4.8 Bay of Plenty 7.3 5.9 Gisborne/Hawkes Bay 7.1 5.9 Taranaki 5.1 4.4 Manawatu-Wanganui 6.6 5.1 Wellington 5.4 4.6 Tasman Nelson etc. 4.6 3.3 Canterbury 6. 4.1 Otago 5. 4.5 Southland 5.6 3.3 NZ 6.6 4.8 (all data not seasonally adjusted) Over 21 employment in New Zealand grew by 1.3% but with a.5% fall in the December quarter following 1.1% growth in the September quarter. The key point to note here is that the survey released by Statistics NZ tends to produce a lot of volatility from quarter to quarter for no obvious reason and we suggest averaging over at least two quarters to truly see what is happening. Page 1
Doing that we see that the labour market is improving with that conclusion validated by a separate measure of hours worked in the quarter improving.3% in the September quarter and.2% in the December quarter. The graph here shows average employment growth over four quarters and illustrates the decline caused by the extended recession then the relatively muted recovery..6.4.2 % NZ JOBS GROWTH Four quarter average. -.2 -.4 -.6 -.8 Source: Statistics NZ 7 8 9 1 Over 21 in Australia job numbers grew by 3.3% and in the United Kingdom employment grew 1.1%. We used the term muted recovery above to describe the improvement in the NZ labour market. But this may erroneously suggest the labour market is quite weak. In fact over 21 while part-time employment fell 2.4% full-time job numbers rose 2.4%, illustrating that employers have been confident enough to reverse the recession trend of changing people from full-time to part-time work. In terms of the industries in which the recovery in jobs growth has been most noted the leader is utilities (electricity etc.) though this sector accounts for only.5% of jobs. Manufacturing has had a strong recovery as has the health sector. Year ago % all % change NZ Jobs Electricity, Gas and Water Supply 3.5.5 Manufacturing 8.4 11.8 Other Services 5.1 11.3 Health and Community Services 3.5 1.4 Accommodation, Cafes and Restaurants 2.4 4.8 Construction 1.4 8.1 Total All Industries 1.3 1. Agriculture, Forestry and Fishing 1.2 7. Wholesale and Retail Trade 1.1 17.2 Property and Business Services.9 11.6 Education -5. 8.5 Communication Services -5.1 1.4 Mining -6.8.3 Transport and Storage -8.3 3.9 Finance and Insurance -8.8 2.9 Not Specified -33..3 Labour Market Tightness With the unemployment rate just below an 11 year high at 6.8% one would not expect the labour market to be tight. Yet it is slowly tightening up even though by historical measures things are still relatively loose in aggregate. The main measure comes from the NZ Institute of Economic Research s Quarterly Survey of Business Opinion. Respondents are asked whether they find skilled and unskilled labour hard or easy to find. On average over the past ten years a net 26% of respondents have said they find skilled labour hard to Page 2
find (net means positives less negatives so neutral = ). The latest reading is a net 7% finding it hard to get the skilled people they want. That is well away from 26% so the skilled labour market is loose. But the interesting thing is that over the past year when the economy has grown only just above 1% this measure has nonetheless moved to a net 7% tight from a net 42% easy in the middle of 29. That is quite a significant and rapid change. 8 6 4 2 Net % EASE OF FINDING LABOUR Things easy Unskilled -2 Skilled -4-6 Things hard Source:NZIER -8 5 6 7 8 9 1 11 We find the same for unskilled labour where the ten year average is a net 5% saying they find it hard to get unskilled labour but the latest reading being a net 19% saying they find things easy. In mid-29 this reading was a net 68% saying it was easy to find unskilled staff. So, unemployment remains high, the labour market is relatively loose but tightening, and job growth so far quite tentative. So what lies ahead? A starting point for answering this question is to look at business employment intentions revealed in opinion surveys. The NZIER survey above showed that in the December quarter a net 4% of respondents said they plan taking on more staff. This was only just below the 5% long term average and up from 2% a year earlier. 3 2 1-1 -2 Net % positive EMPLOYMENT INTENTIONS 1 year average -3 Source:NZIER -4 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 4 3 2 1-1 -2-3 Source:NBNZ EMPLOYMENT INTENTIONS - NEXT 12 MONTHS Net % positive Long term average - latest month -4 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 In addition, a monthly survey by National Bank found in early February that a net 8% of businesses planned hiring more people which is twice the long run average of a net 4%. This survey revealed the breakdown by industry as follows. Net % positive Employment Intentions Latest Average All 8.1 4.4 Retail. -2.9 Manufacturing 6.7.3 Agriculture 9.4-1.4 Construction -5.9 2.5 Services 15.2 11.2 Page 3
In the retailing sector although employment intentions are low they are usually negative anyway so that result is not as weak as it looks. For construction however things are weak with a number of large projects being completed, rising office vacancy rates, and falling demand for new houses. Not so in agriculture however where prices are at record levels, weather conditions have been good recently, and the NZ dollar has even lost some ground in recent months against the US dollar and Japanese Yen. But agriculture makes up only 7% of employment in NZ versus 8% for construction, 12% for manufacturing, (where demand is strong), and 17% in retail trade including wholesaling. Intentions are one thing, and they seem to be positive, but are hiring plans being put into action? We can measure that by looking at job advertisements and there is only one good up to date job ad survey in New Zealand the Department of Labour Jobs Online Monthly Report. In February their trend estimate of job ad numbers rose 1% with 1.4% growth for skilled jobs. The number of ads was 3% above a year earlier or 33% for skilled ads. Growth is strong. 4 ONLINE JOB ADVERTISING 12 2 1 8-2 -4 Index level RHS 6 4-6 -8 Source: NZ Dept. of Labour Month % change LHS 7 A J O 8 A J O 9 A J O 1 A J O 11 2 By large region strongest advertising growth is occurring by far in Auckland and parts of the South Island outside of Christchurch though this latter change looks like a catch-up as growth on a year ago is only 13.1%. Note that we can see evidence of the way in which the February 22 earthquake in Christchurch has for now understandably cut employer willingness to hire. This so far is the only partial measure of the labour market impact of the latest earthquake. Month Year ago Change Growth Auckland 2.% 42.7% Wellington 1.4 25.1 NI Other 1.7 25.1 Christchurch -.6 22.9 SI Other 2.4 13.1 All NZ 1. 29.7 Looking at growth in broadly defined occupational groups we have the following. Again these are trend estimates so changes from month to month are heavily smoothed. Month Year ago Change Growth Managers 1.6% 3.6% Professionals 1.7 34.9 Technicians & trades workers 1.5 42.9 Growth is strong for all occupational types though with some extra strength evident for technicians and tradespeople which is consistent with much anecdotal feedback of growing shortages and worries about availability of labour for rebuilding Christchurch over 212-16. Page 4
Broken down by industry we get the following table again showing the latest monthly change and growth in job ad numbers from a year ago. Demand for Information Technology staff is growing very strongly, followed by the miscellaneous Other category (not very useful that), then Hospitality & Tourism. That latter growth is interesting given that the hospitality sector is being restrained by tight consumer control of discretionary spending, and tourism was suffering even before the two Christchurch earthquakes and now faces bleak conditions with a temporary rugby-related reprieve later this year. Month Year ago Change Growth Accounting, human resources, legal & admin..3% 15.% Construction & engineering. 19.6 Other 1.9 4.5 Healthcare & medical -1.6 1.3 Hospitality & tourism 1.5 28.8 Education & training -.5 1.3 Sales, retail, marketing & advertising 1.5 19.1 Information technology 2.9 7.6 What we conclude from our first issue of the State of the NZ Labour Market is that mild jobs growth is occurring and employers are continuing to look for staff though with some caution as evidenced by the slowing monthly trend change in job advertising. We can see that the February 22 earthquake has dented hiring by Christchurch employers which is understandable given the at least one-third destruction of the CBD and massive staff, water, sewerage and electricity disruption for other businesses in the city. It is likely that the monthly reports for March will show weakness in business hiring intentions given that we already know business sentiment has weakened to a net 21% pessimistic in our post-earthquake survey from a net 22% optimistic beforehand. That weakness will be aggravated for an uncertain period of time by the earthquake and more recently by the events in Japan if not events also in the Middle East. 8. 6. 4. BNZ CONFIDENCE SURVEY Net % expecting the economy to be better in the next 12 months 2.. -2. -4. -6. -8. 5 6 7 8 9 1 11 However we expect to see employer demand for staff picking up again from the September quarter at the latest and anticipate that labour market conditions will become relatively tight over 212, taking the unemployment rate down toward 5% come 213. This will be especially so in the construction sector as rebuilding of Christchurch will commence and coincide with a natural recovery in nationwide house construction from near four decade lows. Our optimism with regard to future demand is partly due to the comments submitted by respondents in the recruitment sector in our March BNZ Confidence Survey (conducted online March 3-4). To whit Industry: Employment Advertising/Marketing. Slow growth across the past 3 months (mirroring activity and volumes of 21), with a negative impact expected on recruitment activity following the Christchurch Earthquake. Some concern over migration numbers in/around RWC211 due to perception issues. Page 5
Recruitment still slow as small to medium size companies keep their recruiting in-house to save money. HR - Employment Relations. Very busy - February 15% up on last year and that was a reasonable month. Busy since November and March looking good - very different to the patchiness of last year. Don't know what impact Christchurch will have on us. Mix of matters - long term confident work - companies dealing with wider matters not just issues that have arisen and must be dealt with. Exec recruitment. very busy before quake but not sure yet what impact quake will have, particularly on fragile confidence. Recruitment for the IT industry. Things have got off to a slow start to the year but most of our clients are gearing up for growth having trimmed back significantly during the GFC. My industry sector is in Recruitment and as General Manager I'm responsible for all divisions. At present we're starting to experience increased job flow in the professionals sector including IT, Accounting Banking & Finance, Sales and Marketing and Legal. This is also supported by an increase in Business Support positions. This increase is being felt nationwide with our organisation. Senior contracting is still a little sluggish however permanent roles seems to be where the increase is being seen. The Christchurch earthquake has had a minimal effect on other areas although many organisations are focusing on this area as a matter of urgency to ensure staff are safe and sound. It's likely that the contracting market will see an increase in focus in the coming months as it becomes a more candidate driven market meaning that permanent staff are becoming more scarce. Executive recruitment. opportunities for candidates - slight yet incremental improvement this calendar year. Many (passive) candidates ready to move once positions open up further. We have seen a sharp increase in the number of temporary and permanent roles being listed- it definitely feels a lot more positive and candidates appear to be feeling confident to seek new employment opportunities. My industry is Employment Services: Staff turnover (churn) is increasing as employees look to earn more money by changing jobs or emigrating to Australia. In the next issue of this report we will examine any updated official data and include more information on where shortages have been identified in the New Zealand labour market. Tony Alexander, Chief Economist, Bank of New Zealand 4 474-6744, tony.alexander@bnz.co.nz, www.tonyalexander.co.nz This publication has been provided for general information only. Although every effort has been made to ensure this publication is accurate the contents should not be relied upon or used as a basis for entering into any products described in this publication. BNZ strongly recommends that readers seek independent legal/financial advice prior to acting in relation to any of the matters discussed in this publication. Neither the Bank of New Zealand nor any person involved in this publication accepts any liability for any loss or damage whatsoever that may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this publication. Page 6