Employment grows as Kiwis and migrants resettle

By BRIAN FALLOW

Employment growth was strong in the first three months of the year and the level of job advertisements points to further gains ahead.

Statistics New Zealand's household labour force survey recorded an increase of 24,000 or 1.3 per cent in the number of people employed in the March quarter, adjusted for seasonal effects.

The supply of labour increased almost as fast, boosted by an inflow of immigrants and returning New Zealanders and an increase in the proportion of working-age people who are either employed or actively seeking work.

The net effect was a small drop in the unemployment rate to 5.3 per cent from 5.4 per cent three months ago as the number of unemployed dropped 1000 to 104,000.

The increase in employment was well above market expectations of 0.5 per cent. Three-quarters of the increase was in male employment, and 14,000 of the 24,000 new jobs were full-time.

Over the year ended March 31 the economy gained 63,000 jobs, about equally divided between full and part-time.

That was an increase of 3.5 per cent, the strongest annual growth for six years.

Although the number of people unemployed has grown by 1000 over the past year, the ranks of the long-term unemployed (six months or more) have thinned by 3000.

While the unemployment rate among Pakeha, at 4.2 per cent, is unchanged on a year ago, Maori unemployment has fallen from 12 to 10.8 per cent, and the decline for Pacific peoples was from 11.2 to 9.7 per cent.

The falls in the unemployment rate came in spite of strong growth in the work force - 65,000 or 3.3 per cent over the past year.

That increase outstripped growth in the working-age population. It grew 42,000, of which 20,000 came from net immigration.

The participation rate, which is the proportion of the working-age population either employed or actively seeking work, jumped by 0.5 percentage points over the quarter and 1.3 percentage points over the past year, to a record 66.9 per cent.

ANZ bank chief economist David Drage says the level of job ads - almost 30,000 last month, seasonally adjusted - points to further employment gains over the months ahead.

"Given how high the participation rate is now, we could see the unemployment rate drop below 5 per cent later this year, for the first time since March 1988."

He says that if the participation rate had not risen in the last quarter, the unemployment rate would have been 4.7 per cent. Drage thinks it is no accident that the increased participation rate coincides with strong net immigration.

"Both returning New Zealanders and new arrivals seem to be more likely to seek work."

ANZ's job ads series rose 6.3 per cent last month, reversing a 2.5 per cent decline in March, which was affected by an early Easter.

Job advertisements have retraced about half of their steep drop in the second half of last year.

With employment growth of 3.5 per cent over the past year, and wage growth of 3.7 per cent on top of that, the strength of retail sales and consumer confidence is unsurprising, economists say. They remain divided on whether next week's increase in interest rates by the Reserve Bank will be 25 or 50 basis points.

WestpacTrust chief economist Adrian Orr said: "On its own the current state of the domestic economy says higher interest rates are needed sooner rather than later to combat domestically generated inflation pressures.

"But disquiet has crept in on the sustainability of the recovery in the global economy, the US in particular."