Confidence rises in the job market but young still affected

Thursday, 21 January 2021

Generic image: woman working on computer, productivity, desk work, office environment.

Confidence in the labour market rose in the last quarter of 2020, as employees hoped for better in 2021.

The Westpac McDermott Miller employment confidence index rose to 97.6 in December, a 10.2 point increase compared to the September survey. A number over 100 indicates that optimists outnumber pessimists.

The job market has come off wage subsidies better than expected, Westpac economist Michael Gordon says.

“New Zealanders’ confidence about labour market conditions has improved, although it remains below pre-Covid levels,” Westpac chief economist Dominick Stephens said.

Most of the improvement in confidence related to job opportunities and job security, he said.

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As Covid-19 restrictions were lifted, activity was able to quickly return towards previous levels, and firms were ready to hire again.

The exception was the tourism sector, due to the closure of international borders.

Westpac said that while job opportunities were improving, earnings growth remained soft. Respondents reported a sharp drop in past earnings since June, and there was only a small pickup in December.

‘’Expected earnings growth over the year ahead rose, but it remains near its historic lows.’’

Confidence amongst employees in the private sector rose significantly since September but remained pessimistic at 96.6, up 12.9 points.

Public sector employees were cautiously optimistic at 100.3, up 4.3 points.

There was also slightly less confidence among young people (18 to 29 years), where sentiment fell 3.2 points to 95.

‘’With young people more heavily reliant on jobs in the hospitality and tourism sector, it seems likely that their confidence will remain suppressed for some months to come,” Imogen Rendall, McDermott Miller’s market research director, said.

Older workers in the 30 to 49 year old age group were the most confident at 100.3, up 14.3 points, while those 50-plus rose 14.5 points to 92.9.

Westpac senior economist Michael Gordon said there was no doubt the Government’s wage subsidy scheme softened much of the blow of last year’s lockdowns, and the rise in unemployment after wage subsidies expired was more modest than feared.

Tourism aside, he said there were good reasons for people to believe that an improvement in hiring was on the way.

‘’The nature of the Covid economic shock was an unusual one – it was largely a restraint on supply, rather than the hit to demand that we see in most recessions.

‘’Firms are ready to hire again, and job advertisements are already back to their pre-shock levels – something that took more than five years after the global financial crisis in 2008.’’

Confidence rose in every region of the country, to varying degrees. Auckland had one of the biggest jumps, a bounce from the tighter restrictions it had been in in September.

But the biggest increase and most upbeat region was Gisborne/Hawke’s Bay, scoring particularly well on perceptions of job opportunities.

Otago saw the least improvement, a likely reflection of the loss of international tourist spending in Queenstown.