Quarterly Labour Market Report December 2016 MB13809 Dec 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 December 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 continued to be favourable... 1 Domestic demand remained the key driver of economic growth... 1 Labour demand strengthened further as employment exceeded population growth... 3 The private sector drove growth in full-time equivalent employee numbers... 3 Filled jobs growth was strong in the services industries... 5 Working-age population continued to grow and was concentrated in younger age-groups... 7 Labour force participation rate at record high 70.1 per cent... 9 Unemployment rate fell below 5.0 per cent... 10 NEET rate up to 11.1 per cent in September from 10.8 per cent in June... 11 Jobseeker support numbers fell only for 40-54 year age-group... 12 Hospitality and tourism job vacancies continued to increase... 13 Since 2005 nominal wage growth subdued and real wage growth was relatively strong... 15 Annex 1: Tracking new measures in the HLFS... 17 Most paid employees were in permanent employment... 17 A significant fall in the number of people with no written agreement... 17 Fewer unemployed and available potential jobseekers this quarter... 18 i
Executive Summary The labour market remained strong in the September 2016 quarter, following a solid result in the June 2016 quarter. This reflected continued strengthening of the New Zealand economy with the GDP annual growth of 2.8 per cent beating market expectations. Population growth and tourism remained key drivers of the New Zealand economy, which stimulated domestic demand. Employment growth exceeded population growth, and was largely driven by an increase in part-time employment. 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 to a record high of 70.1 per cent. Real ordinary-time earnings continued to grow relatively strong. Real ordinary-time hourly earnings have increased by 1.3 per cent over the year to September. Real wage growth this quarter has been stronger than the growth prior to the global financial crisis (1.1 per cent in December 2007). Improvements made to the Household Labour Force Survey (HLFS) last quarter influenced the change in employment in the June 2016 quarter. Quarterly HLFS changes appear to be reasonably robust. We used Quarterly Employment Survey (QES) figures to make annual comparisons where HLFS annual employment figures were used in the past. Table 1: Key labour market indicators (seasonally adjusted) SOURCE: Statistics New Zealand Household Labour Force Survey Indicator September 2016 Quarterly change Annual change Employed 2,494,000 +35,000 (1.4%) +144,000 (6.1%) Unemployed 128,000-3,000 (-2.2%) -9,000 (-7.0%) Participation rate (%) 70.1 +0.4 pp. +1.7 pp. Employment rate (%) 66.7 +0.5 pp. +2.1 pp. Unemployment rate (%) 4.9-0.1 pp. -0.6 pp. i
Economic conditions continued to be favourable New Zealand s economy has continued to grow in 2016; annual growth in the year to June 2016 (latest available) was 2.8 per cent. Real production GDP rose by 0.9 per cent in the June 2016 quarter, beating market expectations. Construction drove growth over the June 2016 quarter, expanding by 5.0 per cent. The high level of Auckland house prices continued to support the construction activity. Retail trade (up 1.9 per cent) and rental, hiring, and real estate services (up 1.3 per cent) contributed to the quarterly growth in June 2016. Domestic demand remained the key driver of economic growth The leading indicators of economic growth also showed significant improvement in business confidence in 2016. The Quarterly Survey of Business Opinion measure of business confidence hit a four-year low in the September 2015 quarter, but increased substantially in the June 2016 quarter and continued to grow in the September 2016 quarter. Likewise the ANZ Business Outlook which hit a six year low in August 2015 showed a marked increase in September 2016. Overall, the September 2016 quarter results indicated that businesses remain optimistic about the economy, their own prospects, profitability and employment. The economy has performed better in the first three quarters of 2016 than forecast by the Treasury in the 2016 Budget. Favourable economic conditions in the September 2016 quarter are mainly due to domestic demand drivers, including construction and household spending. The main contributors influencing domestic demand were high population growth (net migration flows) and increased tourism. Strong population growth also lifted housing demand, particularly in Auckland. The results are in line with the New Zealand Institute of Economic Research (NZIER) September Consensus Forecasts, which projected a strong growth outlook, averaging at 3.2 per cent in 2017, supported by robust domestic demand. Figure 1: Production GDP growth SOURCE: Statistics New Zealand National Accounts 1
Figure 2: Business confidence SOURCES: ANZ Business Outlook, NZIER Quarterly Survey of Business Opinion 2
Labour demand strengthened further as employment exceeded population growth Labour demand strengthened further in the September 2016 quarter. Employment rose by 35,000 (up 1.4 per cent) over the September 2016 quarter, largely driven by an increase in part-time employment. The share of the working-age population in employment rose by 0.5 percentage points to 66.7 per cent, the second-highest in the OECD, as employment growth outstripped population growth. Other indicators have signalled strengthening labour demand. In seasonally-adjusted terms, the Quarterly Employment Survey (QES) measure of filled jobs rose 0.6 per cent in the September 2016 quarter compared to the previous quarter, which was a continuation of an increasing trend that started in the second half of 2014. Actual hours worked (as measured by the HLFS) also rose 1.2 per cent in the September 2016 quarter, which means that people now work longer hours. Figure 3: Main indicators of labour demand SOURCES: Statistics New Zealand Household Labour Force Survey, Statistics New Zealand Quarterly Employment Survey The private sector drove growth in full-time equivalent employee numbers Full-time equivalent (FTE) employee numbers, based on the QES figures, increased by 3.3 per cent (48,600) over the year to September 1 and have now seen an uninterrupted increase since June 2010. Most of the FTE increase comes from a rise in employee numbers in the private sector. The number of FTEs in the private sector went up by 4.1 per cent (46,600) while the public sector went up only by 0.6 per cent (1,900). Figure 4 shows that changes in FTEs had a strong seasonal pattern in the public sector but not private. 1 Not seasonally-adjusted. 3
Since 2010 both male and female FTE numbers have experienced strong growth. The rate of increase was also similar. In the year to September 2016, male FTEs have increased by 3.4 per cent, and female FTEs were up by 3.2 per cent (see Figure 5). Figure 4: Full-time equivalent employee index by sector SOURCE: Statistics New Zealand Quarterly Economic Survey (QES) 2 Figure 5: Female/male full-time equivalent employee index SOURCE: Statistics New Zealand Quarterly Economic Survey (QES) 2 We are using QES figures for sector employment breakdown due to methodological and question changes in the June 2016 HLFS. 4
Filled jobs growth was strong in the services industries 3 According to the QES, professional services 4 as well as accommodation services contributed the most to the increase in the number of filled jobs over the year to September 2016. Professional services had a significant increase in filled jobs by 18,700 (up 7.6 per cent) in the year to September, which was nearly a third of total growth in filled jobs. Accommodation and food services also picked up, with a statistically significant increase of 12,600 filled jobs (up 9.5 per cent). The contribution of the construction industry to the overall growth was moderate (3 per cent of total growth) over the year to September 2016 (up 1,800 or 1.2 per cent). Figure 6 displays 10-year cumulative growth in the number of filled jobs across different industries. Particularly strong growth since September 2006 is observed for the professional services, health care and social assistance and construction industries. Most of the filled job growth came from the growing number of filled jobs in the services sectors as a result of tourism and net migration growth. While the majority of filled jobs growth over the year to September 2016 was in Auckland (24,700 new jobs or 45 per cent of total growth) and Canterbury (12,100 new jobs or 22 per cent), Wellington contributed 2,400 new jobs and the rest of New Zealand saw an increase of 16,100 new jobs. 3 In this section, we only use the QES and not the HLFS figures to analyse changes by industry and region. 4 Professional services include scientific, technical, administration, and support services. 5
Figure 6: Change in the number of filled jobs from September 2006 (000s) by industry SOURCE: Statistics New Zealand Quarterly Economic Survey (QES) 5 5 Please note for this quarterly update we are using QES figures for industry employment breakdown due to the June 2016 changes in HLFS. 6
Figure 7: The number of filled jobs (indexed to September 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. In the September 2016 quarter, the working-age population grew by a seasonally-adjusted 24,000 people (0.6 per cent). Over the year, the working-age population grew by 101,000 (2.8 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. Since 2014 the number of people arriving on student visas has increased significantly, primarily among Indian and Chinese students. Also fewer New Zealanders in this age group compared to other age-groups are migrating to Australia or other countries. Annual net gain of migrants rose to 70,000 New Zealand had a net migration gain of 70,000 in the year ending September 2016, the highest net migration on record. The annual net gain in migrants has been setting new records for the last 26 months. This increase in net migration was driven by both increasing arrivals of non-new Zealanders and decreasing departures of New Zealanders. 7
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 2,000 people in the year to September 2016. Arrivals from Australia are up from September 2015, while departures to Australia are down. The fall in migrant departures to Australia was primarily due to fewer New Zealand citizens leaving for Australia. Departures of New Zealand citizens to Australia fell 6 per cent to 20,100 in the September 2016 year from 21,500 in the September 2015 year. Migrant arrivals totalled 125,600 in the year to September 2016, up 5.7 per cent from the previous June year, while migrant departures totalled 55,700, down 3.4 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. The year to September 2016 results show a slight drop in the number of student visas mainly due to a decrease in the number of Indian students (down 30 per cent) coming to New Zealand, who represent around a third of all student visa arrivals to New Zealand. In contrast, the number of Chinese students has picked up by 10 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 at record high 70.1 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 0.4 percentage points to 70.1 per cent in the September 2016 quarter. This increase is a continuation of an increase seen in the March and June quarters of 2016. The labour force grew by 32,000 (1.2 per cent) in the September 2016 quarter. This labour force growth was driven by a 35,000 increase in employment, offsetting a 3,000 decrease 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 the working-age population has been declining faster than the labour force since 2012. This trend is likely to be attributed to demographic shifts. Among older workers, the labour force is growing 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, especially for the 65 and over agegroup. In recent years, stronger-than-forecast participation rate increases within older age groups (55-64) have kept participation rates buoyant. 9
Figure 10: Change in labour force and population by age group from September 2006 (000s) SOURCE: Statistics New Zealand Household Labour Force Survey Unemployment rate fell below 5.0 per cent The seasonally-adjusted unemployment rate fell 0.1 percentage points to 4.9 per cent in the September 2016 quarter. Over this quarter, unemployment rates for men and women fell by 0.1 and 0.3 percentage points, respectively. The fall in unemployment was solely attributed to a decrease in the number of females unemployed (down 3,000 people), while the number of males unemployed remained the same. Unemployment rates decreased across most regions over the year, with a statistically significant decrease in the Nelson/Tasman/Marlborough/West Coast region (Upper South Island) to be the lowest in the country at 2.8 per cent. Auckland s unemployment rate was 5.3 per cent (down 0.3 percentage points from previous year September), while unemployment in Canterbury has increased slightly (up 0.4 percentage points) to reach 3.9 per cent. Overall, unemployment in the North Island has decreased faster than in the South Island (down 0.8 vs 0.2 percentage points), reducing the gap between the North Island (5.2 per cent) and South Island (3.8 per cent). 10
Figure 11: Unemployment rate by region, % SOURCE: Statistics New Zealand Household Labour Force Survey NEET rate up to 11.1 per cent in September from 10.8 per cent in June The seasonally-adjusted youth not in employment education or training (NEET) rate increased slightly to 11.1 per cent this quarter, up from 10.8 per cent in the June 2016 quarter and 11.0 per cent a year ago. Figure 12 shows that there was an increase in the number of young people (aged 15-24) who are employed but not in education (up 18,000 people since the June 2016 quarter). The number of NEETs seems to have remained static since 2010 once seasonal adjustment is taken into account 6. While the NEET rate rose slightly this quarter, the rate remains below the long-run average since March 2004. 6 Changes in the number of youth in the labour force in the latest quarter should be interpreted with caution. 11
Figure 12: Labour force outcomes for youth aged 15-24 SOURCE: Statistics New Zealand Household Labour Force Survey Jobseeker support numbers fell only for 40-54 year age-group Over the past five years, the number of people on jobseeker support benefits has decreased from 140,800 in September 2011 to 122,300 in September 2016. Changes in benefit numbers over this period largely reflect changes in economic conditions, and an increased focus by Work and Income on moving job seekers into paid work. Despite a decrease in the number of unemployed this year (down by 9,000 or 7 per cent), jobseeker support numbers increased by 1.1 per cent or 1,400 (comparing September 2016 with September 2015). There were increases in Jobseeker Support numbers in the 18-39 and 55-64 year age groups, and a decrease in the 40-54 year age group. In the September 2016 quarter, 122,300 working-age people were receiving Jobseeker Support, representing 4.2 per cent of New Zealand s working-age population 7. This is a small decrease (down by 0.1 per cent) compared with September 2015. The number of people on Jobseeker Support increased among the 18-39 and 55-64 year age groups, but fell for 40-54 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: 7 Based on Statistics NZ National Population Estimate year ended September for relevant years, which only includes 18-64 year olds (Ministry of Social Development definition). 12
- 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 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 number of vacancies has been steadily increasing since September 2009. Annual changes have been positive, although annual growth has slowed from 19.3 per cent in the year to August to 16.1 per cent in the year to September 2016. The All Vacancies Index rose 0.5 per cent in September 2016 (compared with the previous month), with growth being led by other industry growth (1.2 per cent) and education (0.9 per cent). The biggest fall was for information and technology (down by 1.4 per cent). Over the year, job vacancies increased in all industry groups. The strongest growth in vacancies was for hospitality and tourism (up 21.2 per cent), other industries (up 16.7 per cent), and education and training (up 15.6 per cent). At a regional level, the strongest annual increases in vacancies were in the Bay of Plenty (up 64.8 per cent), Nelson\Tasman\Marlborough\West Coast (up 37.0 per cent), Otago (up 35.0 per cent), and Gisborne/Hawke s Bay (up 34.7 per cent). There was a small decrease in Canterbury (down 8.5 per cent). 13
Figure 14: Annual change in all vacancies index SOURCE: Ministry of Business, Innovation and Employment Jobs Online 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 Nominal wage growth subdued while real wage growth continued to be relatively strong 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. The LCI increased by 1.6 per cent for the year to September 2016. This quarter was the first time since 2010 that public sector wages outgrew the private sector (1.7 vs 1.6 per cent) due to an increase in the collective agreements for nurses, primary teachers and police. The recent real growth in the LCI has been the strongest over the past decade. Consumer price index (CPI) growth was the same as the previous quarter. CPI increased by 0.4 per cent from the September 2015 quarter to the September 2016 quarter. Nominal ordinarytime earnings grew by 1.7 per cent over the year to September and 2.1 per cent of the year to June 2016. Real ordinary-time hourly earnings have increased by 1.3 per cent over the year to September 8. This growth in September 2016 quarter has been stronger than the growth prior to the global financial crisis (1.1 per cent in December 2007). 8 The real ordinary-time earnings calculation was based on seasonally-adjusted CPI series. 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 9 9 Not seasonally adjusted series. 16
Annex 1: Tracking new measures in the HLFS Statistics New Zealand has redeveloped the HLFS to improve the relevance and quality of labour market statistics and implemented the changes in the June 2016 quarter. This section below highlights key results on employment relationship. Most paid employees were in permanent employment In the September 2016 quarter, 90.0 per cent of people who were paid employees in their main job were permanent employees. Males had a slightly higher rate (91.4 per cent) than females (88.4 per cent). Figure 18 shows that there was a decrease in the number of male casual employees between the June and September 2016 quarters. Such decrease was not observed for females. The proportion of females who were fixed term was higher than males in both quarters. Overall, there were no major changes in the composition of female paid employees by employment relationship between June and September quarters. Figure 18: Employment relationships in June and September 2016 quarters SOURCE: Statistics New Zealand Household Labour Force Survey A significant fall in the number of people with no written agreement In the September 2016 quarter, 65.0 per cent of employees were on an individual employment agreement and 19.5 per cent were on a collective employment agreement. The proportion of males on individual employment agreement was higher than females (67.5 per cent vs. 62.5 per cent), while the opposite was true for employees on collective agreement (16.6 per cent for males vs. 22.5 per cent for females). In the September quarter, 158,600 people (7.9 per cent of employees) had no written employment agreement. There was a significant fall from the 171,000 people (8.6 per cent of employees) with no 17
written agreement in the June 2016 quarter to 158,600 (7.9 per cent of employees) in the September 2016 quarter. 10 This fall was observed for both males and females, although the decrease was larger for males (down from 8.9 per cent to 7.8 per cent for males vs. from 8.3 per cent to 8.0 per cent for females). Figure 19: Number of employees by employment agreement in June and September 2016 quarters SOURCE: Statistics New Zealand Household Labour Force Survey Fewer unemployed and available potential jobseekers this quarter To keep New Zealand information in line with other OECD countries, an underutilisation measure was introduced to the HLFS in the June 2016 quarter. Labour underutilisation reflects the total number of people in the labour force who are not being fully utilised 11. Figure 20 shows the components of underutilisation by gender. There were more females underutilised than males, although the number of underutilised decreased in the September 2016 quarter compared to previous quarter (down 9,300 females or 4.6 per cent and 3,600 males or 2.5 per cent). For females, this decrease was mostly attributed to a decrease in the number of unemployed (down by 3,600) and available potential jobseekers (down by 8,500). For males, the decrease was mostly attributed to a decrease in the available potential jobseekers (down 3,900). 10 A written employment agreement is a legal requirement in New Zealand. 11 Those who are unemployed, underemployed or potential labour force: available potential jobseekers and unavailable jobseekers. 18
Figure 20: Underutilisation and unemployment rate over time SOURCE: Statistics New Zealand Household Labour Force Survey 19