Youth bear the brunt as unemployment ratchets up to 4.3%

Wednesday, 1 May 2024

Infometrics principal economist Brad Olsen dissects the latest unemployment numbers.

The official unemployment rate rose to 4.3% in the three months to the end of March, up from 4% previously, Stats NZ has reported.

The labour market underutilisation rate, which is a broader measure of the proportion of people wanting work and part-timers seeking more hours, showed a similar increase, rising to 11.2%, from 10.7% in the December quarter.

Official unemployment rose by 31,000 over the year to March with youth unemployment among people aged 15 to 24 accounting for the bulk of that annual increase, rising by 21,000, Stats NZ noted.

The proportion of people in that age group who were not in employment, education or training inched up to 12.4% in the March quarter, from 12.3% in the December quarter, but has jumped significantly from 10.6% a year prior, Stats NZ reported.

Some economists had expected the proportion of people in work would rise during the March quarter even as unemployment increased, with the proportion not in work but not counted in the official unemployment numbers falling.

But Stats NZ instead reported that the employment rate fell 0.6 percentage points to 68.4% in the March quarter.

Kiwibank is forecasting unemployment will rise to 5.3% by the end of the year.

The rise in official unemployment was not a surprise to many, however.

The Reserve Bank, ANZ and Westpac had forecast the rate would come in at 4.2%, while BNZ and Westpac had tipped 4.3%.

Total average weekly earnings for those in work rose by 5.8% over the year to March, Stats NZ estimated.

That was higher than the 4% inflation rate but lower than Stats NZ’s estimate of the overall increase in the cost-of-living, which takes into account the impact of rising interests rate on loans such as mortgages, and which Stats NZ has estimated at 6.2%.

“Although wage-cost inflation and average hourly earnings growth started to slow this quarter, annual growth remained high,” its business employment insights manager Sue Chapman said.

Higher pay in the heathcare and education sectors contributed significiantly to the increase in earnings, Stats NZ said.

Kiwibank chief economist Jarrod Kerr said the only way to describe the labour market figures was “weak”.

“We must remember that the Kiwi economy has been through a significant recession. The labour market lags the economy by about nine months to a year, so there's still another year of softness ahead.

“We continue to forecast the unemployment rate lifting to 5.3% by year end,” he said.

Capital Economics economist Abhijit Surya said the Reserve Bank would “take comfort from the fact that inflationary pressures coming out of the labour market are easing”.