Unemployment rises less than feared to 4.6%, but job options dry up for youth

Wednesday, 7 August 2024

33,000 more people are classified as unemployed, than a year ago.

The official unemployment rate edged up to 4.6% in three months to the end of June, from 4.4% in three months to the end of March, Stats NZ has reported.

It previously estimated unemployment at 4.3% in the March quarter before a revision on Wednesday, and economists had expected unemployment to come in at 4.7% in the latest quarter, meaning the latest rise is about half that economists expected.

However, the latest figures still paint a bleak picture for the nation’s youth, some of whom face few opportunities as vacancies dry up.

Stats NZ labour market manager Deb Brunning said almost half the rise in unemployment over the past year was accounted for by young people aged between 15 and 24.

Just over a fifth of 15 to 19 year-olds are unemployed and the proportion of 15 to 24 year-olds not in employment, education or training is 12.8%, up from 11.7% over the year.

Kiwibank calls the Reserve Bank's statement dovish, predicting a rate cut by November. With a softened tone and faster inflation fall projections, Kiwibank remains confident in a 2023 rate cut, which is good news for households and businesses.

Overall, 143,000 people were classed as unemployed in the June quarter, up from 110,000 a year prior.

The “underutilisation rate”, which is a broader measure of the labour market and records the proportion of people wanting more hours, such as part-time workers wanting full-time employment, rose to 11.8% from 11.2% in the previous quarter.

The rise in unemployment comes amid now clamouring calls for early interest-rate relief from the Reserve Bank, and growing fears soaring wholesale electricity and gas prices could result in a significant number of lay-offs in the manufacturing industry.

The Government changed the Reserve Bank’s mandate late last year to restore its sole focus on inflation and remove the consideration it previously had to give to maximising sustainable employment.

But commenting ahead of Stats NZ’s release on the prospect of a jump in unemployment, Finance Minister Nicola Willis said “any New Zealander losing their job concerns me”.

Nevertheless, the Government had been right “to make sure we're not adding pressure to inflation, by being more fiscally careful”, she said.

Last week, ANZ, ASB, Kiwibank and Westpac had all been forecasting official unemployment would rise to 4.7%.

The Reserve Bank correctly forecast in May that unemployment would rise to 4.6%, but monthly jobs data released by Stats NZ since then should have given the commercial banks the edge in making predictions.

ANZ said that, if anything, the labour market data made a rate cut before November less likely.

The proportion of people in employment lifted 0.4% over the quarter, when it had expected a 0.2% contraction, and the labour force participation rate lifted, it noted.

Moody’s Analytics said the jobs market had more cooling ahead, but there were “troubling signs for wage growth” in part of a pick-up in public sector pay.

Westpac senior economist Michael Gordon also said wage growth remained “on the high side”.

Average weekly earnings for those in full-time work rose 5.3% over the year to $1612, but those in the public sector fared much better than those in the private sector.

Average private sector weekly earnings for full-time employees rose 4.4% to $1528, while, for public sector workers, the rise was 7.5%, taking their average weekly earnings to $1934.

Those figures include overtime.

“The effects of pay increases for some health workers, along with school therapists and early childhood education staff, have all come through in public sector wage growth this quarter, in addition to other settlements seen over the year,” Brunning said.