Quarterly Labour Market Report September 2016 MB13809 Sept 2016
Ministry of Business, Innovation and Employment (MBIE) Hikina Whakatutuki - Lifting to make successful MBIE develops and delivers policy, services, advice and regulation to support economic growth and the prosperity and wellbeing of New Zealanders. MBIE combines the former Ministries of Economic Development, Science + Innovation, and the Departments of Labour, and Building and Housing. More information www.mbie.govt.nz 0800 20 90 20 Information, examples and answers to your questions about the topics covered here can be found on our website www.mbie.govt.nz or by calling us free on 0800 20 90 20. Disclaimer This document is a guide only. It should not be used as a substitute for legislation or legal advice. The Ministry of Business, Innovation and Employment is not responsible for the results of any actions taken on the basis of information in this document, or for any errors or omissions. ISSN 2253-5721 September 2016 Crown Copyright 2016 The material contained in this report is subject to Crown copyright protection unless otherwise indicated. The Crown copyright protected material may be reproduced free of charge in any format or media without requiring specific permission. This is subject to the material being reproduced accurately and not being used in a derogatory manner or in a misleading context. Where the material is being published or issued to others, the source and copyright status should be acknowledged. The permission to reproduce Crown copyright protected material does not extend to any material in this report that is identified as being the copyright of a third party. Authorisation to reproduce such material should be obtained from the copyright holders.
Contents Executive Summary... i Economic conditions continue to be favourable... 1 Economy performed better than forecasted by the Treasury... 1 Labour demand strengthened... 3 Strong growth in full-time equivalent employee numbers in the private sector... 3 Construction was a key driver of filled jobs growth, particularly in Auckland... 5 Working-age population continued to grow and was concentrated in younger age-groups... 7 Labour force participation rate was up to 69.7 per cent... 9 Unemployment rate down to 5.1 per cent... 10 NEET rate down to 10.7 per cent... 11 Jobseeker support fell for older age-group, but rose for 18-39 year olds... 12 Hospitality and tourism job vacancies continued to increase... 13 Real ordinary-time hourly earnings rose by 1.7 per cent over the year... 15 Annex 1: Significant changes to the HLFS... 17 More people responded as employed... 17 Some industries were more unionised than others... 18 Part-time and casual employees were more likely not to report having an employment agreement... 18 Underutilisation is largely consistent with unemployment pattern... 19 i
Executive Summary The labour market has remained strong in the June 2016 quarter, following a solid result in the March 2016 quarter. This reflects favourable economic conditions, mainly due to domestic demand, in the first half of 2016. The working-age population had its largest quarterly rise since the series began in 1986, as net migration continued to break records. Growth in the labour force was even larger, lifting the labour force participation rate. Wage pressures remain subdued, although this comes against a backdrop of historically low inflation levels. Wage growth (as measured by the Labour Cost Index) has outpaced growth in the Consumer Price Index (CPI) for more than four years. While annual wage growth remained soft in the June quarter, low annual CPI inflation resulted in growth in real wages. The June 2016 quarter results for the HLFS reflect the first full-scale redevelopment in its 30- year history. There were many major and minor changes to the survey and the impact of these can sometimes be hard to distinguish from real-world effects. Therefore, changes between the March and June quarter results should be treated with caution. Table 1: Key labour market indicators (seasonally adjusted) SOURCE: Statistics New Zealand Household Labour Force Survey Indicator June 2016 Quarterly change Annual change Employed 2,460,000 +58,000 (2.4%) +105,000 (4.5%) Unemployed 131,000-1,000 (-1.0%) -6,000 (-4.6%) Participation rate (%) 69.7 0.9 pp. 0.8 pp. Employment rate (%) 66.2 1.0 pp. 1.1 pp. Unemployment rate (%) 5.1-0.1 pp. -0.4 pp. i
Economic conditions continue to be favourable New Zealand s economy has continued to grow in 2016; annual growth in the year to March 2016 (latest available) was 2.4 per cent. Real production GDP rose by 0.7 per cent in the March 2016 quarter, slightly beating market expectations. Construction drove growth over the March quarter, expanding by 4.9 per cent. The high level of Auckland house prices continued to support the construction activity. Health care and social assistance (both private and public health care) was up 2.7 percent, also contributed to the quarterly growth in March 2016. Economy performed better than forecasted by the Treasury The leading indicators of economic growth also showed significant improvement in business confidence in the first half of 2016. The Quarterly Survey of Business Opinion measure of business confidence hit a four-year low in September 2015, but has increased substantially in the June quarter of 2016. Likewise the ANZ Business Outlook which hit a six year low in August has picked up in the months that followed and showed a marked increase in June 2016. Economy has performed slightly better in the first half of 2016 than forecasted by the Treasury in the 2016 Budget forecasts. Domestic demand was the key driver of economic growth in the June quarter. Strong domestic demand led to an increase in labour earnings, which boosted household spending in the June quarter. This upswing in activity was also driven by a combination of high population growth due to a net migration gain, low interest rates, growth in tourist arrivals and an increasing housing demand. 1
Figure 1: Production GDP growth SOURCE: Statistics New Zealand National Accounts Figure 2: Business confidence SOURCES: ANZ Business Outlook, NZIER Quarterly Survey of Business Opinion 2
Labour demand strengthened Reflecting the robust economic growth, labour demand strengthened in the first half of 2016. Employment growth was 2.4 per cent (58,000) in the June quarter 2016, with all the increase coming from full-time employment. The share of the working-age population in employment rose by 1.0 percentage point to 66.2 percent, the fourth-highest in the OECD, as employment growth outstripped population growth. The Household Labour Force Survey (HLFS) redesign had a significant influence on the employment figures, which makes it difficult to interpret how much of the increase between the June and earlier quarters reflects the actual increase. Other indicators have signalled strengthening labour demand. In seasonally-adjusted terms, the Quarterly Employment Survey (QES) measure of filled jobs rose 3.1 per cent in the year to June, which was a continuation of an increasing trend started in the second half of 2014. Actual hours worked (as measured by the HLFS) also rose 5.7 per cent in the year to June, compared with 2.5 per cent in the year to March 2016. Figure 3: Main indicators of labour demand SOURCES: Statistics New Zealand Household Labour Force Survey, Statistics New Zealand Quarterly Employment Survey Strong growth in full-time equivalent employee numbers in the private sector 1 Full-time equivalent (FTE) employee numbers, based on the QES figures, have increased by 3.2 per cent (46,400) over the year to June 2, and have seen an uninterrupted increase since June 2010. The number of FTEs in the private sector went up by 4.0 per cent (45,400) and in the public sector it went up only by 0.3 per cent (1,000). Thus, most of the FTE increase comes from the private sector rise in the employee numbers. Private sector growth has caught up to 1 In this section, we only use the QES and not the HLFS figures to analyse changes in employment by sector and sex. The redesign of HLFS had a significant impact on the employment figures, therefore the QES figures are likely to better reflect the change from the previous quarter. 2 Not seasonally-adjusted. 3
the public sector growth this June year (Figure 4) 3. There is more volatility in the public sector than private sector FTE numbers, which were not adjusted for seasonality. Since 2010 both male and female FTE numbers have experienced strong growth. The rate of increase was also similar. In the year to June 2016, male FTEs have increased by 2.9 per cent, and female FTEs were up by 3.4 per cent (see Figure 5). Figure 4: Full-time equivalent employees index by sector SOURCE: Statistics New Zealand Quarterly Economic Survey (QES) 4 3 June 2006 quarter (equals to 100) is the base for index series in Figure 4 and 5. 4 We are using QES figures for sector employment breakdown due to methodological and question changes in the June 2016 HLFS. 4
Figure 5: Female/male full-time equivalent employees index SOURCE: Statistics New Zealand Quarterly Economic Survey (QES) 5 Construction was a key driver of filled jobs growth, particularly in Auckland 6 According to the QES, accommodation and food services and construction contributed the most to the increase in the number of filled jobs over the year to June 2016. Accommodation and food services had a significant increase in filled jobs by 14,000 (11 per cent) on the previous year to June. Construction was also one of the main industries driving an increase in the number of filled jobs over the year, with a statistically significant increase of 9,900 filled jobs (6.8 per cent). Figure 6 displays 10-year cumulative growth in the number of filled jobs across different industries. Particularly strong growth since June 2006 is observed for professional services, health care and social assistance and construction industries. At a regional council level, the majority of filled jobs growth over the year to June was in Auckland (39,600 or 6 per cent new jobs). Most of this growth came from the growing number of construction jobs. Strong growth was also observed in Canterbury, with the number of filled jobs increasing by 10,200 or 3.9 per cent. There was a slight drop in filled jobs (4,100 or 1.9 per cent) observed in Wellington this June quarter. The rest of New Zealand also saw an increase, albeit small, in the number of filled jobs. 5 We are using QES figures for employee status breakdown due to methodological and question changes in the June 2016 HLFS. 6 In this section, we only use the QES and not the HLFS figures to analyse changes by industry and region. The redesign of HLFS had a significant impact on the employment figures, therefore the QES figures are likely to better reflect the change from the previous quarter. 5
Figure 6: Change in the number of filled jobs from June 2006 (000s) by industry SOURCE: Statistics New Zealand Quarterly Economic Survey (QES) 7 7 Please note for this quarterly update we are using QES figures for industry employment breakdown due to the June 2016 changes in HLFS. Please see Annex 1 for detail. 6
Figure 7: The number of filled jobs (indexed to June 2006=100) by regional council SOURCE: Statistics New Zealand Quarterly Economic Survey Working-age population continued to grow and was concentrated in younger age-groups While labour demand has been increasing, this is being matched by strong growth in New Zealand s labour supply. The working-age population continues its strong growth since the March 2016 quarter. In the June 2016 quarter, the working-age population grew by a seasonally-adjusted 32,000 people (0.9 per cent), the largest quarterly increase since the series began in 1986. Over the year, the working-age population grew by 99,000 (2.7 per cent), the strongest annual increase on record. The working-age population growth is concentrated in younger age-groups, particularly 20-34 year olds, and is largely a migration effect. Fewer New Zealanders in this age group compared to other age-groups are migrating to Australia or other countries. 7
Record high net migration at 69,100 New Zealand had a net migration gain of 69,100 in the year ending June 2016, the highest net migration on record. The annual net gain in migrants has been setting new records for 23 months in a row as of June 2016. This increase in net migration was driven by both increasing arrivals of non-new Zealanders and decreasing departures of New Zealanders. The record net loss of people to Australia of 40,000 in the year to August 2012 year has changed to a net gain of 1,900 people in the year to June 2016. Fewer New Zealanders are leaving for Australia, with departures of New Zealand citizens to Australia falling 7 per cent (to 20,200) over the year to June 2016. Migrant arrivals totalled 125,100 in the year to June 2016, up 7.5 per cent from the previous June year, while migrant departures totalled 56,000, down 2.5 per cent. A continued increase in net migration was driven by an increase in work visa arrivals; an increase in the number of returning New Zealand citizens since 2012; and increase in the number of student visas since 2014. Indian students represent around a third of all student visa arrivals to New Zealand. In the year to June 2016, there has been a slight decrease in the number of Indian students coming to New Zealand from the previous year June. In contrast, the number of Chinese students has picked up by 17 per cent since previous year. Figure 8: Annual net migration SOURCE: Statistics New Zealand Permanent and Long-term Migration Series 8
Figure 9: Annual arrivals by visa type SOURCE: Statistics New Zealand Permanent and Long-term Migration Series Labour force participation rate was up to 69.7 per cent Quarterly growth in the labour force outpaced even the strong working-age population growth, causing the labour force participation rate to rise by 0.9 percentage points to 69.7 per cent in June 2016. This increase is a continuation of an increase seen in the March quarter 2016. The labour force grew by 57,000 (2.2 per cent) in the June 2016 quarter, the largest quarterly increase since December 2004. This labour force growth was driven by a 58,000 increase in employment, and a slight decrease (1,000) in unemployment. Figure 10 shows changes in labour force and working-age population by age group. The 15-24 year age group employment is highly seasonal, and includes many students whose opportunities for part-time work fell during the recession. For the 35-44 year age group both the working-age population and the labour force have been declining at a similar rate since the base June quarter in 2006. This trend is likely to be attributed to demographic shifts. Among older workers, the labour force grows much more slowly than population, and the gap seems to have widened over time. An ageing population is expected to put downward pressure on the participation rate over the longer-term. In recent years, stronger-than-forecast participation rate increases within older age groups have kept participation rates buoyant. 9
Figure 10: Change in labour force and population by age group from June 2006 (000s) SOURCE: Statistics New Zealand Household Labour Force Survey Unemployment rate down to 5.1 per cent Over the quarter, unemployment rates for men and women fell by 0.1 and 0.3 percentage points respectively. The June unemployment fell by 1,000 (1 per cent). This consisted of a 2,000 decrease in female unemployed, and a 1,000 increase in male unemployed. The annual unemployment rate fell from 5.5 per cent to 5.1 per cent (down by 0.4 percentage points) in the June 2016 quarter. Unemployment rates increased in 6 of the 12 regions over the year. Northland recorded a statistically significant rise in its unemployment rate (up 3.1 percentage points to 10.6 per cent), the highest unemployment rate in the country by a gap of 4.7 percentage points. The Auckland, Gisborne/Hawke s Bay, and Taranaki regions had statistically significant decreases in the unadjusted unemployment rate over the year to June 2016. The Auckland region had a decrease of 1.2 percentage points, bringing the unemployment rate down to 4.7 percent, the lowest since September 2008. Statistics New Zealand has changed its method to better identify people who were unemployed. Now people who only Looked at job advertisements are classified as unemployed regardless as to whether it was in the newspaper or online. This change has impacted on the number of not in the labour force. The new series have been back casted and is comparable with the previous year. 10
Figure 11: Unemployment rate by region, % SOURCE: Statistics New Zealand Household Labour Force Survey NEET rate down to 10.7 per cent Changes in the number of youth in the labour force in the latest quarter should be interpreted with caution, due to the redeveloped HLFS 8. The changes in the new HLFS better identification of self-employed people and inclusion of the defence force personnel are relevant for youth because this could result in more youth being counted as employed. This is more likely to be the case for youth aged 20 24, not those aged 15 19 years old. In addition to this, the new HLFS questions have been improved to better identify education and caregiving status. It is not yet possible to determine whether this has had a material effect on the estimates of those not in employment, education, or training (NEET). The seasonally-adjusted NEET rate decreased 1.7 percentage points, to 10.7 percent in the June 2016 quarter. This was the lowest NEET rate since September 2008. 8 Please see the Annex1 for more detail. 11
Figure 12: Labour force outcomes for youth aged 15-24 SOURCE: Statistics New Zealand Household Labour Force Survey Jobseeker support fell for older age-group, but rose for 18-39 year olds The number of people on Jobseeker Support benefits has remained flat over the past year, although the general trend over the past five years shows declining numbers of recipients. As of June 2016, 117,954 working-age people were receiving Jobseeker Support, representing 4.2 per cent of New Zealand s working-age population 9. This is a small decrease (118, or -0.1 per cent) compared with June 2015. The number of people on Jobseeker Support fell among the 40-64 year age group, but rose for 18-39 year olds. Jobseeker Support was introduced in July 2013 for people who are preparing for, and looking for, full-time work. It incorporates the unemployment benefit, sickness benefit, domestic purposes benefit with children 14 and older, and domestic purposes women alone benefit. Since 2012, there has been a divergence between the official number of people unemployed (the HLFS measure) and the number of Jobseeker Support beneficiaries. Persons ineligible for Jobseeker Support (but classified as unemployed) include: - Unemployed 15-17 year olds - Unemployed people 65 or older - Unemployed people looking for part-time work (such as students) - Unemployed people with sufficient family or personal income to support them while looking for work - Unemployed people already on another benefit 9 Based on Statistics NZ National Population Estimate year ended June for relevant years, which only includes 18-64 year olds (Ministry of Social Development definition). 12
Figure 13: Unemployed (seasonally-adjusted) and Jobseeker Support SOURCE: Statistics New Zealand Household Labour Force Survey; Ministry of Social Development National Benefit Factsheets Hospitality and tourism job vacancies continued to increase The overall trend for vacancies has been rising in late 2015 and early 2016. The All Vacancies Index rose 0.2 per cent in July, with growth being led by hospitality and tourism (3.1 per cent) and sales, retail, marketing and advertising (0.9 per cent). The biggest fall was for construction and engineering (down by 1.6 per cent).over the year to July 2016, the strongest growth in vacancies was for hospitality and tourism (up 23.1 per cent), business services (up 11.8 per cent), and other (up 17.4 per cent). At a regional level, the strongest annual increase in vacancies were in Bay of Plenty (up 49.2 per cent), Nelson\Tasman\Marlborough\West Coast (up 39.1 per cent), and Gisborne/Hawke s Bay (up 36.8 per cent). The smallest rise was in Canterbury (up 7.1 per cent). Figure 14: Annual change in all vacancies index SOURCE: Ministry of Business, Innovation and Employment Jobs Online 13
Figure 15: Jobs Online Vacancies by Industry (Indexed to May 2007) SOURCE: Ministry of Business, Innovation and Employment Jobs Online 14
Figure 16: Jobs Online Vacancies by Region (Indexed to August 2010) SOURCE: Ministry of Business, Innovation and Employment Jobs Online Real ordinary-time hourly earnings rose by 1.7 per cent over the year The Labour Cost Index (LCI) and QES provide complementary measures of wage growth. The LCI measures wage inflation and reflects changes in the rates paid by employers to have the same job done to the same standard. The QES measures the average gross earnings paid to employees in economically significant businesses. Changes in the QES may result from changes to New Zealand s industrial composition (e.g. if a lower-paying industry increased its total paid hours relative to other industries, it would lower the QES earning measure). Shifts in the QES may also reflect changes within industries, such as the skill levels or performance of employees. Wage growth has remained steady over the past 4-6 years, against a backdrop of very low inflation. The LCI increased by 1.5 per cent for the year to June, while average ordinary-time hourly earnings (as measured by the QES) increased by 2.1 per cent. Nominal average ordinary-time earnings did not grow as fast in June as in the March quarter (2.4 per cent in the year to March), real growth has been moderate despite low CPI inflation level. With the CPI increasing by just 0.4 per cent over the year to June, this resulted in growth in real hourly wages of 1.7 per cent for the year. 15
Figure 17: Wage and salary inflation SOURCES: Statistics New Zealand Labour Cost Index, Statistics New Zealand Quarterly Employment Survey, Statistics New Zealand Consumers Price Index 16
Annex 1: Significant changes to the HLFS Statistics New Zealand has redeveloped the HLFS to improve the relevance and quality of labour market statistics and has implemented it in the June 2016 quarter. In particular, there were significant changes to the description of the employment status, as well new measures introduced union membership and employment agreements and underutilisation. More people responded as employed The new HLFS produced a higher than expected employment figure, which was out of sync with seasonal pattern, for the June quarter. Statistics New Zealand identified two contributors: more selfemployed and the inclusion of the defence force in the survey and target population The redeveloped survey refined the question about employment status. As a result, more people were now identified as self-employed (when they might not have been in the previous HLFS). More people who previously identified themselves as paid employees or not in the labour force now classified as self-employed. The large jump in self-employed (not employing others) in the June quarter is more than just a re-classification of people (as with employers versus paid employees). Any real increase in the number of self-employed people this quarter is likely to have been exaggerated by changes to the survey. At this point, it is not feasible to accurately differentiate between real employment growth and the effects of the new HLFS until more data based on the redeveloped survey become available. Figure 18: Employment status in main job (000s) SOURCE: Statistics New Zealand Household Labour Force Survey 2,500 300 Number of people employed ('000) 2,000 1,500 1,000 500 0 240 180 120 60 0 Paid employees Self-Employed Not Specified Employer Unpaid family worker Another change to the HLFS that had an impact on the employment figures was inclusion the defence forces in the survey and target population. The target population for the HLFS no longer excludes defence force personnel, and the survey population includes defence personnel who are living in private dwellings (who will now be part of the survey instead of being out of scope). This 17
automatically added about 9,000 people to the working age population (~7,000 to the number of employed). Some industries were more unionised than others Apart from changes to the existing questions, some new measures were introduced: union membership and employment agreements and underutilisation. Union membership and employment agreements measure has two parts: a) union membership of employees and b) whether employees have a written employment agreement, and if they do, whether it is an individual or collective employment agreement. In June 2016, 1 in 5 paid employees were union members. This translates to 380,000 paid employees who were more likely to be over 30 years old; in the public sector; and employed as professionals. Union membership is dominated by industries where the public sector is a dominant player. Almost half (49.2%) of union members worked in healthcare and social assistance and education and training. Part-time and casual employees were more likely not to report having an employment agreement Another measure that is now collected every quarter in the HLFS is written employment agreement. Most employees reported they had a written employment agreement, although this varied by employment relationship. For instance, part-time employees (17.4 percent) were three times more likely to report not having a written employment agreement than full-time workers (6.4 percent). One-third of casual workers (33.7 percent) reported not having a written agreement compared with 6.8 percent of permanent employees. Figure 19: Proportion of employees with no written employment agreement by employment relationship (%) SOURCE: Statistics New Zealand Household Labour Force Survey 50 45 40 Percent of employees 35 30 25 20 15 10 5 0 Permanent employee Casual employee Fixed-term Seasonal - permanent Seasonal - temporary Temporary employee not further specified All Employees Type of employment relationship 18
Underutilisation is largely consistent with unemployment pattern To keep New Zealand information in line with other OECD countries, an underutilisation measure was introduced to the HLFS this June quarter. Labour underutilisation reflects the total number of people in the labour force who are not being fully utilised (i.e. either unemployed, underemployed or potential labour force). Figure 20 shows the components of underutilisation. Underutilisation measure is largely in line with the unemployment rate pattern over time (Figure 21), although some differences arise when considering the sub-groups (ethnicity, qualification, age-group etc.). Figure 20: Underutilisation decomposition SOURCES: Ministry of Business Innovation and Employment Figure 21: Underutilisation and unemployment rate over time SOURCE: Statistics New Zealand Household Labour Force Survey 16 Percent, March quarters 14 12 10 8 6 4 2 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Underutilisation Unemployment 19