Quarterly Labour Market Report May 2015 MB13090_1228 May 2015
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 May 2015 Crown Copyright 2015 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... 1 Economic conditions... 2 Domestic conditions... 2 Exports... 2 Economic outlook... 3 Labour demand... 4 Overall employment growth... 4 Employment growth by full-time/part-time status... 4 Employment growth by sex... 5 Employment growth by industry... 6 Employment growth by region... 6 Labour supply... 8 Labour force participation rates... 8 Migration... 8 Labour market matching... 10 Unemployment by region... 10 Unemployment by duration... 11 Jobseeker support... 12 Youth labour markets... 13 Job vacancies... 13 Wage growth... 15 Special feature: Reviewing regional employment growth... 16
Executive summary An expanding economy has kept labour demand solid, with employment increasing by 16,000 (0.7 per cent) over the March quarter, and 74,000 (3.2 per cent) over the year to March. Most of this increase is from full-time employment, with 60,000 more people employed full-time in the March quarter than a year ago. The strengthened economy has encouraged more people to enter the labour force, both domestically and from abroad. The labour force participation rate is at an all-time high, rising to 69.6 per cent in the March quarter. Migration is also at record levels, with New Zealand gaining a net 56,300 permanent and long-term migrants in the year ending March. Labour force growth has kept the unemployment rate unchanged at 5.8 per cent this quarter. Wage growth remains subdued given strong economic growth, but this comes against a backdrop of low inflation. Wage inflation (as measured by the Labour Cost Index) has outpaced the Consumer Price Index for three and a half years. Figure 1- Key labour market indicators (seasonally adjusted) Indicator March 2015 Quarterly change Annual change Employed 2,355,000 +16,000 (0.7 %) +74,000 (3.2 %) Unemployed 146,000 +3,100 (2.1 %) -900 (0.6 %) Participation rate (%) 69.6 +0.2 pp. +0.6 pp. Employment rate (%) 65.5 n/c +0.7 pp. Unemployment rate (%) 5.8 n/c -0.2 pp. MBIE forecasts employment growth to remain strong but for growth rates to decline over the next three years. The unemployment rate is forecast to drop below 5.0 per cent by March 2017. Figure 2- Short-term labour market forecasts (year ending March, or March quarter) Actual Forecast 2014 2015 2016 2017 Employment growth (AAPC) 2.8 3.4 3.6 2.1 Participation rate (%) 69.3 69.8 69.9 70.1 Employment rate (%) 65.1 65.8 66.3 66.8 Unemployment rate (%) 6.0 5.7 5.2 4.8 1
Economic conditions New Zealand experienced solid economic growth in 2014, and recent indicators suggest that this is likely to continue through the first half of 2015. Offshore risks remain, with soft growth across major economies, and weaknesses in commodity prices. Figure 2- Annual and quarterly production GDP growth Source: Statistics New Zealand Domestic conditions GDP rose 0.8 per cent in the December quarter, down from 0.9 per cent in September. The main contributor to growth was the retail trade and accommodation industry (up 2.3 per cent, the largest quarterly increase for this industry since the Rugby World Cup in 2011, largely due to increased spending from international tourists). The rental, hiring and real estate industry was the second largest contributor to overall GDP growth (up 1.2 per cent). Increased house sales are driving growth in this sector, with real estate services up more than 20 per cent. Manufacturing was up 1.0 per cent, due to an increase in petroleum, chemical, polymer and rubber product manufacturing. Drought conditions provided a partial counterbalance to the overall growth: activity in the utilities sector dropped 2.5 per cent on the back of lower hydro-electricity generation, and agricultural production was flat over the quarter. Exports Merchandise exports fell 0.6 per cent ($70 million) in the March quarter. This followed a 0.9 per cent increase in the December quarter, influenced by a drilling platform export. Export values have been trending down over recent quarters, and have fallen 7.4 per cent from a record high in March 2014. 2
Economic outlook Indicators of firm activity have fallen from the record levels recorded at the start of 2014, but remain buoyant. The latest Quarterly Survey of Business Opinion showed that a net 20 per cent of firms expected general business conditions to improve over the next six months, a level similar to that recorded in the September and December quarters. The ANZ Business Outlook shows a similar picture, and both are pointing to increased hiring activity in 2015, especially for the construction and services industries. Figure 3- Indicators of business confidence Source: ANZ Business Outlook (ANZBO), NZIER Quarterly Survey of Business Opinion (QSBO). Business confidence is defined as the percentage of businesses expecting general business conditions to improve minus the percentage expecting them to decrease. 3
Labour demand Employment growth was strong throughout 2014, and remained so at the start of 2015. Drivers of employment growth are shifting, with Canterbury playing a less prominent role. Figure 4- Annual and quarterly employment growth Source: Statistics New Zealand Overall employment growth The number of people employed in New Zealand increased by 16,000 (0.7 per cent) between the December and March quarters, and 74,000 (3.2 per cent) in the year ending March. This is the tenth consecutive quarter of employment growth. Employment growth by full-time/part-time status Full-time employment has been the main driver of recent employment growth. In the March quarter, full-time employment increased by 11,000 (0.6 per cent), the tenth consecutive quarter of growth. Over the year, full-time employment increased by 60,000 (3.4 per cent). Part-time employment rose very slightly over the quarter, and is up 12,500 (2.4 per cent) over the year. Part-time employment growth was stronger than full-time employment growth at the end of the last business cycle (around 2007), but growth for both types of employment stalled during the recession. Since 2012, full-time employment growth has been strong, while part-time employment growth has been volatile. 4
Figure 5- Full-time/part-time employment indices Source: Statistics New Zealand, Ministry of Business Innovation and Employment Employment growth by sex Quarterly employment growth consisted of a 12,000 (1.0 per cent) increase in male employment, and a 4,000 (0.4 per cent) increase in female employment. The male employment rate reached 71.2 per cent, the highest since December 2008. Male employment growth fell relative to female employment during the recession, although the growth gap has narrowed since 2013. Figure 6- Female/male employment indices Source: Statistics New Zealand, Ministry of Business Innovation and Employment 5
Employment growth by industry Around a third of annual growth in employment came from the construction industry (up 23,300, or 12.3 per cent). Growth in the construction industry was concentrated in Canterbury (up 8,600) and Auckland (up 6,700). Outside construction, growth was also strong in arts, recreation and other services (up 17,700, or 12.6 per cent), manufacturing (up 15,900, or 6.6 per cent), and retail trade and accommodation (up 13,900, or 3.9 per cent). Over the past decade, nearly 90 per cent of employment growth has been in five industries: health and social assistance, business services, construction, other services, and retail trade and accommodation. Declining manufacturing employment partially dampened overall growth in this period. Figure 7- Cumulative employment growth by industry since March 2005 Source: Statistics New Zealand, Ministry of Business Innovation and Employment Employment growth by region Around half of national employment growth in the year to March was in Auckland, with an additional 36,800 people employed (up 4.8 per cent). Canterbury was up 11,900 (3.7 per cent) over the year: this accounts for 16 per cent of total annual growth, down from the one-third Canterbury was contributing in the year to September. Employment rates have picked up in most regions over the year to March. The strongest increase was in Southland, which rose 3.0 percentage points to 71.9 per cent, followed by Taranaki (up 1.7 percentage points to 66.5 per cent), Gisborne/Hawke s Bay (up 1.6 percentage points to 62.4 per cent), and Otago (up 1.5 percentage points to 69.6 per cent). 6
Figure 8- Employment rates by region (annual average) Source: Statistics New Zealand 7
Labour supply In the March quarter, the labour force grew by 19,100 (0.8 per cent). This comprised an additional 16,100 people in employment and 3,100 people in unemployment. This pushed the labour force participation rate to 69.6 per cent, the highest on record. Over the year to March, the labour force increased by 72,800 (3.0 per cent), with half of this growth coming from those in the 20-34 year old age group. This age group also accounted for over two-thirds of the increase in permanent and long-term arrivals between the 2014 and 2015 March years. Labour force participation rates Growth in the labour force participation rate was mainly driven by an increase in male participation, which has risen to 75.3 per cent, its highest level since December 2008. The female participation rate fell slightly from the all-time high recorded in the previous quarter, but remains elevated at 64.2 per cent. Migration In the year ending March 2015, New Zealand had a net gain of 56,300 migrants, the highest level of annual net migration on record. MBIE forecasts annual net migration to exceed 60,000 by June 2015, before dropping back to about 53,000 by December 2016. Net migration consisted of 113,800 arrivals and 57,500 departures. Compared with the March 2014 year, growth in net migration has been driven both by more arrivals (up 15,800, or 16.1 per cent) and fewer departures (down 8,600, or 13.0 per cent). Three trends are underpinning the growth in arrivals. Firstly, since 2011, work visas have returned to a pre-recession trajectory, a trend supported by workers arriving for the Canterbury rebuild. Secondly, from 2012 onwards, the number of New Zealand citizens returning from abroad has been increasing. 29,300 New Zealand citizens migrated to New Zealand in the year ending March 2015, up 1,900 from the previous year. Finally, in the last two years there has been a sharp uptick in the number of student visas, primarily for Indian students. Alongside the increasing arrivals, departures of New Zealanders has been dropping since mid- 2012. 35,700 New Zealand citizens migrated from New Zealand in the year ending March 2015, the lowest number of departures since the year ending April 1995. 8
Figure 9- Annual net migration to/from New Zealand Source: Statistics New Zealand Figure 10- Annual permanent and long-term arrivals by visa type Source: Statistics New Zealand 9
Labour market matching In the March quarter, the number of unemployed people increased by 3,100 (2.1 per cent), and the unemployment rate remained unchanged at 5.8 per cent. Unemployment has fallen slightly over the year (by 900, or 0.6 per cent), as has the unemployment rate (down 0.2 percentage points from 6.0 per cent). Unemployment by region Over the year to March, unemployment rates fell in nine out of twelve regions, with the biggest drops being recorded in Gisborne/Hawke s Bay (down 1.2 percentage points to 7.3 per cent), Waikato (down 0.9 percentage points to 6.1 per cent), and Otago (down 0.8 percentage poitns to 3.8 per cent). The gap between the North Island and South Island unemployment rates has grown over the year, and is now at its widest level since March 1992 (at 6.9 per cent and 3.6 per cent respectively). Figure 11- Unemployment rates by region, annual average Source: Statistics New Zealand 10
Figure 12- North Island and South Island unemployment rates (not seasonally adjusted) Source: Statistics New Zealand Unemployment by duration Over the year to March, the number of short-term unemployed fell, while there were small increases in medium and long-term unemployment. Compared to March 2013, there were 3,100 fewer people unemployed for less than 8 weeks, while numbers unemployed for 9-26 weeks and more than six months increased by 2,900 and 100 respectively. Figure 13- Unemployment by duration (not seasonally adjusted) Source: Statistics New Zealand 11
Jobseeker support In July 2013, Work and Income New Zealand introduced Jobseeker Support for people who are preparing for, and looking for, full-time work. Jobseeker Support incorporates the unemployment benefit, sickness benefit, domestic purposes benefit with children 14 and older, widows benefit with children 14 and older, and domestic purposes women alone benefit. The number of Jobseeker Support clients fell by 5,060 (4 per cent) over the year ending March 2015. Decreases were recorded across all age groups, with the largest falls coming from the 40-54 age group. Since 2011, there has been a divergence between the numbers of people officially 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 aged 65 years 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 14- Jobseeker Support beneficiaries and unemployment Source: Statistics New Zealand, Ministry of Social Development 12
Youth labour markets The overall NEET rate for 15-24 year olds rose 0.5 percentage points to 11.8 per cent in the March quarter, but is down 0.3 percentage points over the year. The rise was strongest for females aged 15-19 years old, whose NEET rate increased from 7.2 per cent to 9.6 per cent over the quarter. Females aged 20-24 also saw a rise in their NEET rates, from 18.1 per cent to 19.8 per cent. Males in both age groups saw declining NEET rates (from 8.3 to 6.9 among 15-19 year olds, and from 11.5 per cent to 11.0 per cent for 20-24 year olds). Figure 15- NEET rates for 15-24 year olds by sex Source: Statistics New Zealand Job vacancies MBIE s Jobs Online skilled vacancies index measures the change in job vacancies advertised on the two main internet job boards- SEEK and TradeMe jobs. The overall trend for online skilled job vacancies has increased in recent months. Online vacancies for skilled jobs grew by 5.8 per cent over the year to March. Vacancies increased in most industry groups, with the largest increases coming from education and training (up 24.5 per cent), accounting, HR, legal and administration (up 13.6 per cent) and hospitality and tourism (up 13.0 per cent). Skilled vacancies have increased in nine out of ten regions in the year ending March. The biggest annual increases were in Bay of Plenty (up 24.6 per cent), Gisborne/Hawke s Bay (up 11.8 per cent), and Auckland (up 10.6 per cent). 13
Figure 16- Skilled Vacancies Index Source: Ministry of Business, Innovation and Employment Figure 17- Skilled Vacancies Index by Region Source: Ministry of Business, Innovation and Employment 14
Wage growth The Labour Cost Index (LCI) and Quarterly Employment Survey (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 been subdued over the March quarter, but this comes against a backdrop of low inflation. LCI wage inflation (salary and wage rates including overtime) was up 1.7 per cent over the year, while QES average ordinary time hourly earnings rose 2.1 per cent. This compares to annual CPI growth of 0.1 per cent. Wage inflation has now been higher or equal to the CPI for three and a half years. Figure 18- Annual wage growth Source: Statistics New Zealand 15
Special feature: Reviewing regional employment growth On March 31 2015, Statistics New Zealand revised prior estimates from the Household Labour Force Survey to account for the latest population estimates following the 2013 Census. It also introduced regional benchmarks to help improve the quality of regional labour force estimates. These benchmarks ensure that the regional working age population estimates are aligned to other official statistics, rather than being derived entirely from the HLFS and benchmarked to the national working age population. The revisions change historic estimates of the working age population and therefore of the numbers employed and unemployed. The overall changes from prior estimates at the national level are small but there are noticeable changes to quarterly estimates for each region 1. Consequently, prior estimates of year on year employment growth at each quarter are revised for each region. Because the impact on the national working age population is very small, the net impact across regions balances out, which increases in population estimates in some regions being balanced by falls in other regions. Estimates of growth in employment numbers over 5 years for each region are different for preand post-revisions series. The data in Table 1 illustrates the differences in estimated 5 year growth for the main regions. This example shows very noticeable differences both in the employment estimates for each quarter and the size of the employment growth. For example, in Otago the previous employment growth estimate of 26 per cent falls to 12 per cent. However, these estimates are very sensitive to which base quarter is chosen. Table 1- Annual average employment growth (000s) for the main regions, five years to December 2014 Auckland Wellington Canterbury Otago Prerevision Postrevision Prerevision Postrevision Prerevision Postrevision Prerevision Postrevision Dec-09 655 699 277 254 330 293 108 108 Dec-14 782 795 278 269 361 328 134 121 5 year change 127 97 1 15 30 35 26 13 MBIE has compared annual employment growth estimates for both pre-revisions and postrevisions quarterly series for the past five years. Figures 19 to 21 below illustrate the impact of these revisions at each quarter, for annual percentage employment growth for four main regions. In summary, over the past five years, the growth pattern for employment as shown by annual percentage changes in employment in each region is similar for pre-revisions and postrevisions data, with the revised series being less volatile. For Auckland, there is generally good agreement between the two series, but with notable recent differences of 5.3 percentage points in the September 2011 quarter and 4.8 percentage 1 Household Labour Force Survey population rebase from 2013 Census: Includes regional benchmarks, Statistics New Zealand 2015 16
points in the September 2013 quarter. The Wellington series show good alignment in recent years, but with a notable difference of 4.8 percentage points in the December 2013 quarter. The Canterbury series show large variations historically, while trending similarly from the March 2009 quarter, except for a notable difference of 5.5 percentage points in the June 2014 quarter. From June 2011, the Otago series align well, while showing large variations historically. Figure 19- Auckland annual employment growth, pre- and post-revisions Source: Statistics New Zealand, Ministry of Business Innovation and Employment Figure 20- Wellington annual employment growth, pre- and post-revisions Source: Statistics New Zealand, Ministry of Business Innovation and Employment 17
Figure 21- Canterbury annual employment growth, pre- and post-revisions Source: Statistics New Zealand, Ministry of Business Innovation and Employment Figure 22- Otago annual employment growth, pre- and post- revisions Source: Statistics New Zealand, Ministry of Business Innovation and Employment 18
The regional benchmarks also affect estimates of regional employment within each industry. Figure 23 below illustrates the impact of the revisions on employment estimates for the construction industry in Canterbury. It compares employment numbers in the two series for Canterbury construction for the three years to December 2014. In general both series show the same long-term upwards trend. From the March 2014 quarter, pre-revisions employment estimates were over-estimated, reaching a peak difference of 5,500 in the June 2014 quarter. This difference is reduced substantially by the December 2014 quarter as both series move closer to their same long-term trend. Figure 23- Canterbury construction employment, pre- and post-revisions Source: Statistics New Zealand, Ministry of Business Innovation and Employment 19