Slower rise in benefit numbers shows lull before third wave of job losses, economists say

Friday, 7 August 2020

Some businesses laid staff off when they realised customer demand had changed post-lockdown, Shamubeel Eaqub said.

New Zealand may be going through a lull before a third wave of job losses hit, economists say.

Data released by the Ministry of Social Development on Friday showed that six people of working age became recipients of a main benefit in the week to July 31.

Another 934 people took out the Covid-19 income relief payment, a more generous payment that covers people who have lost their jobs due to the pandemic.

The rate of increase in the number on both benefits has slowed in recent weeks.

Economist Shamubeel Eaqub said it was a pattern he expected to see.

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There was one big wave of redundancies during lockdown, he said, followed by a period of relief when the economy opened up again. Then there was another wave when businesses realised consumer demand had changed.

“Now we are waiting for the impact of global stuff going through. The circular effect of having no job, so spending less, which means no job, also takes longer to unfold.”

He said the third wave could hit over 12 to 18 months.

“There’s no big catalyst for significant job losses right now. Job ads are holding up OK, New Zealand is in a relatively good position.”

Household Labour Force Survey data this week showed unemployment dropped in the June quarter, to 4 per cent.

Eaqub said the data showed the effect of the subsidy scheme. People reported a reduction in hours worked of 10 per cent but the amount they were paid only dropped 3 per cent.

Infometrics chief forecaster Gareth Kiernan said the second wave of unemployment had been tempered by the wage subsidy extension.

There could be an increase in job losses when that ran out in September, he said. Kiernan said he still expected to see unemployment peak somewhere over 8 per cent.

The data also shows that there are still 466,412 jobs associated with the wage subsidy scheme.

So far, $354.3 million has been paid back by employers who claimed the subsidy but either did not need or qualify for it.