Fewer jobseeker support applications shows economy doing better than expected

Friday, 31 July 2020

North Island suffering from more unemployment than South Island.

Slowing growth in benefit claims indicates the economy is holding up better than expected, an economist says.

The Ministry of Social Development (MSd) figures showed over the week to July 24, an additional 1478 people went on to a jobseeker support benefit or Covid-19 income relief payment.

The number of people applying for those benefits peaked over the week to April 3, the week the country went into lockdown, with 9410 people going on the benefit.

As at last week, there were 212,397 people on either a jobseeker support benefit or income relief payments.

Economist Brad Olsen says the economy is doing better but still not great.

* Jobseeker numbers topped 201,000 in June, and more job-losses expected

* Prime Minister Jacinda Ardern confirms wage subsidy to end in September

Infometrics senior economist Brad Olsen said while the number of people going on the benefits had slowed, businesses were still struggling, with companies announcing job cuts despite the wage subsidy scheme.

“Businesses are still finding it difficult … but not as difficult as many economists would have expected during lockdown,” Olsen said.

“It is showing some promise but with the wage subsidy ending in September, that is when the crunch time will begin as they start to reassess how they can cope in these economic conditions.

“With the school holidays now behind us, and a trans-Tasman bubble out of reach for now, the question remains if New Zealand can maintain the stronger momentum that it has built up over recent weeks.”

Olsen said it was likely that the Government would announce more targeted relief to businesses in August.

“One area we’re likely to see more support within tourism, boosting the regions and more support with digital development as online retailing becomes more important now than ever before.”

Earlier this month the Government increased its tourism package from $100 million to $400m.

Olsen said in the short term there would likely be more activity in the gig economy as businesses navigate through uncertainty.

“You may well see people on short-term contracts or working for themselves, which is positive but at the same time makes them more vulnerable to swings in the economy as contractors are generally the first to go if the economy takes a dive again.”