Labour market situation - March 2009
We’ve asked the team of independent economists at Business and Economic Research Limited (BERL) to have a look at the New Zealand job market. Here’s their take on what job areas may be most and least affected by the current economic downturn. They also take a look at what’s likely to happen in the job market during the next couple of years.
- Building construction is one of the industries most affected by the economic downturn
How healthy is the New Zealand job market?
Employment in New Zealand grew throughout 2008, despite the global economic downturn. However, this growth may slow in 2009, as the downturn impacts on demand for goods and services.
The industries that will be most affected by this downturn include:
- building construction
- finance and insurance
- property services
- retail trade
- hospitality and tourism
- our primary sector (which includes farming, horticulture and fisheries).
Employment was still growing in the December 2008 quarter, according to the Household Labour Force Survey (HLFS), with just a slight weakening in labour demand.
- There were 18,500 more people in work in the year to December 2008 than in the previous year.
- There were 45,000 more people wanting to work in the December 2008 quarter than in December 2007 quarter.
- Unemployment in the quarter grew by 26,000 people (or 0.4%) to 4.6%.
Unemployment is driven by the total number of people in the labour force (all the people wanting to work) less the number of people who are employed. The rise in unemployment in 2008 was not because of people losing their jobs, but because more people joined the labour force.
The current unemployment rate is relatively low when compared with levels over the past 20 years.
Source: Statistics New Zealand, ‘Household Labour Force Survey’.
What areas of employment are in decline?
While the recession and a weakening in labour demand will have an effect on all industries, those that employ more low-skilled and part-time workers will be most affected. The table below shows the Department of Labour’s assessment of the recession’s impact on various industries.
Positive and negative impact of the recession on New Zealand industries
Industry | Positive factors | Negative factors |
|---|---|---|
Agriculture | Potential rebound from drought, lower exchange rate | Fall in world demand and commodity prices, reduced availability of credit |
Forestry and fishing | Lower fuel and shipping costs | Fall in world demand, particularly in housing markets |
Mining | Ongoing oil and gas exploration and extraction | Fall in world demand and commodity prices |
Manufacturing | Lower exchange rate, except against the Australian dollar | Fall in world demand, higher cost of imported plant and machinery |
Electricity, gas and water | Potential rebound from drought | - |
Construction | Infrastrucure spending, lower interest rates | Reduced availability of credit, lower net migration inflows |
Wholesale and retail trade | Personal income tax cuts, lower fuel prices, lower interest rates | Rising unemployment, falling house prices, lower exchange rate raising import prices |
Accommodation, cafés etc | Lower exchange rate | Fall in world demand for tourism, lower domestic consumer spending |
Transport and storage | Lower fuel prices | Weaker exports, including tourism, weaker imports |
Communications | Infrastructure spending on broadband | - |
Business and financial services | Infrastructure spending (eg engineering) | Downstream impact from global financial crisis and downturn, lower house prices and sales |
Other services | Ongoing government spending, ageing population | Downstream impact from general downturn |
Source: Department of Labour, (Information prepared for the Prime Minister’s Summit on Employment).
During the December 2008 quarter, the number of workers in the following industries fell:
- the primary sector (includes farming, horticulture and fisheries)
- construction trade services
- motor retailing
- services to finance
- property services.
Jobs affected by the recession
The number of tradespeople has continued to fall – particularly building finishers and mechanics. The number of salespeople and clerks has also dropped.
Occupations that went from growth to a reasonably significant drop in employees during the December quarter were:
- general managers
- architects
- engineers.
A government-backed infrastructure investment programme may reverse the decline in employment for building tradespeople, architects and engineers.
- The sport and recreation industry is hiring more full and part-time workers
What areas of employment are growing?
The number of part-time workers in the labour force rose by 19,300 between December 2007 and December 2008, while the number of full-time workers fell by 800.
Some argue that employers are turning to casual staff who are “easier to let go if need be”. But the industries that are significantly increasing their part-time staff are also hiring more full-time workers.
These industries are predominantly:
- food retailing
- business services
- sport and recreation
- education
- community services.
Growing areas of employment that are closely related to these industries include:
- business professionals
- teachers
- restaurant and personal service workers.
What’s the outlook for the next few years?
Most commentators believe the global economy will recover in 2010, and export and import volumes will strengthen further in 2011. The New Zealand Government has shown a willingness to act as necessary to encourage business and consumer confidence, and minimise the effect and length of the recession. The key factor for New Zealand is the global recovery.
How New Zealanders react to the second round of tax cuts, which came into place on April 1, will also have an effect on the economy. What that effect will be depends on whether households use their tax cuts to pay off debt and boost savings, or spend, and help to stimulate the economy.
Job growth expected to continue at slower rate, while unemployment will rise
Between 2009 and 2011, job growth is expected to slow and unemployment increase.
- Job growth is expected to increase at a slower rate. Businesses may hire fewer staff, as they are not making or selling more products and services, and will be pessimistic about their ability to make or sell more in the future.
- Unemployment is expected to rise as businesses that are feeling the pinch reduce existing staff or do not replace those that leave.
- The number of people who are not in the labour force is expected to increase, because people may choose not to enter the labour force as there are fewer jobs around. Younger people will stay at school or do tertiary study as there will be fewer unskilled jobs. Older people may retire, as flexibility to take up part-time work or other positions declines.
An additional 17,000 people will not enter the labour force due to the recession. Adding the increase in unemployment and the increase in those not in the labour force together means 46,500 to 76,400 people will not be in work because of the recession.
Sources
- BIS Shrapnel Pty Ltd, ‘Economic Outlook’, December 2008/January 2009, Sydney: BIS Shrapnel.
- BIS Shrapnel Pty Ltd, ‘Economic Outlook’, February 2009, Sydney: BIS Shrapnel.
- Business and Economic Research Limited (BERL), ‘BERL Monthly Monitor: February 2009’, Wellington: BERL.
- Department of Labour, (Information prepared for the Prime Minister’s Summit on Employment), February 2009, (www.beehive.govt.nz).
- Jensen, B, ‘The Emperor Has No Clothes: New Zealand’s Vulnerability in the Face of the Global Economic and Financial Crisis’, The New Zealand Institute, February 2009.
- Statistics New Zealand, ‘Household Labour Force Survey: December 2008 Quarter’, February 2009, (www.stats.govt.nz).
