Unemployment rate plunges to 3.4 per cent, matching record low in 2007

Wednesday, 3 November 2021

Unemployment is at a level only seen once before in recent times, just before the global financial crisis.

Unemployment in the three months to the end of the September has slumped to 3.4 per cent, Stats NZ has reported.

The unemployment rate is down from 4 per cent in the June quarter.

Stats NZ work and wellbeing manager Becky Collett said it was the lowest rate of unemployment the country had recorded, matching the rate in the three months to the end of December in 2007, when it was also 3.4 per cent.

The number of unemployed fell by 18,000 over the quarter to 98,000, which, combined with 54,000 more people in employment, drove the unemployment rate down, Stats NZ said.

* New Zealand is staring down the barrel of a recession

* Adrian Orr says Reserve Bank only has 'bit role' in unsustainable house prices

“The fall in the unemployment rate is in line with reports of difficulty finding workers and high labour turnover, and continued travel restrictions on international arrivals, which put pressure on domestic labour supply,” Collett said.

An economist says a proposed unemployment insurance scheme won't be cheap. (Video first published in 2021)

Westpac acting chief economist Michael Gordon noted Covid restrictions would have nudged the unemployment rate downward a little, as some people were not able to actively look for work.

Stats NZ estimated that reduced the headline unemployment rate by 0.2 percentage points, he said.

But the “under-utilisation” rate, which measures unemployment along with the proportion of people in work but who would like more hours, and those wanting jobs but who are either unavailable or not actively seeking work – also fell.

That rate stood at 9.2 per cent in the September quarter, down sharply from 10.5 per cent in the June quarter.

Reserve Bank governor Adrian Orr appeared to play down the drop in unemployment, describing economic data as “volatile” at the moment.

That also matched the record low in that figure in 2007, Stats NZ said.

The unemployment figure is likely to heap pressure on the Reserve Bank to raise interest rates faster, coming after a shock jump in inflation to 4.9 per cent in the September quarter.

Reserve Bank governor Adrian Orr was preparing to host a media conference on financial stability as the figures came through but declined to comment on the implications for monetary policy.

Labour market data, and economic data in general, was “highly volatile at present”, he said.

“The underlying trends are very clear,” Orr said. “The Covid economic shock has had a significant impact on the supply side of the economy as well as demand, so we are seeing strong demand for all resources.”

Finance Minister Grant Robertson said the Covid pandemic was likely to see the unemployment rate move around a bit but noted the country’s employment rate – measuring the proportion of people in work – was now the “third highest in the OECD”.

“This is a very positive result given the impacts of higher alert level restrictions,” he said.

ASB senior economist Jane Turner described the labour market as “scorching hot”.

Most analysts and the Reserve Bank had been expecting the rate to come in at 3.9 per cent, she said.

Stats NZ said average ordinary-time hourly earnings, as measured by its Quarterly Employment Survey, increased 3.5 per cent over the year to reach $35.25 an hour.

But Turner said “wage inflation” was slightly more modest than the bank and the market had expected, with pay rising 0.7 per cent over the previous quarter, versus forecasts of 0.8 per cent.

Annual wage inflation among full-time workers in the private sector rose to 2.5 per cent, from 2.2 per cent, Turner said.

“Given the extremely tight labour market and rising cost of living, we expect wage inflation will continue to rise to an annual rate of 3 per cent over the coming year,” she said.

ANZ said the unemployment data reinforced the fact the jobs market had been “incredibly resilient” to Covid restrictions.

“Today’s data showed no signs of weakness, despite the economy spending half the quarter in lockdown,” the bank said in a research note.

The main impact of the lockdown would probably not show through until the December quarter figures were released early next year, it said.

“But so far, the labour market shows no signs of slowing down.”