Economists play down jobless rise

Employment has grown in Auckland, but not as fast as the population. Photo / Paul Estcourt

Lift in unemployment rate to 6.4% to be expected after very strong March quarter.

The June quarter's 8000 increase in the number of people employed was not enough to keep pace with growth in the labour force as a whole, and unemployment rose.

Market economists generally opted to look on the bright side, saying that modest employment growth and an increase in the unemployment rate to 6.4 per cent from 6.2 per cent three months ago were only to be expected after a very strong March quarter in which employment rose by 38,000.

"At 6.4 per cent the unemployment rate is still well below last year's average of 6.9 per cent," said Westpac economist Felix Delbruck.

But it is also only just on the right side of the average of 6.6 per cent recorded over the four years since the recession, and outside Canterbury the rate is 6.8 per cent.

Bank of New Zealand economist Craig Ebert said the 0.4 per cent increase in employment on top of a 1.7 per cent rise in the March quarter was "a great follow-on" and that it was a higher participation rate which had bumped the unemployment rate up a bit.

But at 68 per cent the participation rate - the proportion of the working age population either employed or actively seeking work - remains below its average level of 68.2 per cent over the past four years.

The number of unemployed at 153,000 (an increase of 5000 from March) compares with an average of 156,000 over the past four years.

Over the past year employment nationwide has increased by 16,100, and Canterbury (up 16,800) explains all of the net increase.

Employment had also grown in Auckland, albeit by less than the population, but that growth had been offset by employment losses elsewhere in the country, said Deutsche Bank chief economist Darren Gibbs.

Most of the June quarter's employment growth was in part-time work and 17 per cent of part-timers said they wanted to, and could, work more hours. ANZ economist Mark Smith said there was more spare capacity in the labour market than a 6.4 per cent unemployment rate suggested.

"Average hours worked per employee fell to 33.6 [a week] and remain well below historical averages of about 35, suggesting some spare capacity within the existing labour force," he said.

The NEET rate - the proportion of 15 to 24-year-olds not in employment, education or training - fell to 12.1 per cent, from 12.6 per cent in March and was the lowest rate since December 2008. That reflected a strong rise in the number of young people studying, up 12,200 or 6.5 per cent compared with a year ago.

The flipside of a stubbornly high unemployment rate is weak wage growth. The labour cost index, also released yesterday, recorded a rise of just 1.7 per cent in salary and ordinary-time wage rates over the year to June, the weakest since September 2010, but an increase of 1 per cent in real terms.

Among the 55 per cent of pay rates which rose over the past year the median increase was 2.7 per cent, the lowest since March 2001.

Even in the Canterbury construction industry the pace of wage growth, including overtime, slowed to 3.6 per cent for the year to June from 4.3 per cent in March. It was 2.1 per cent in the rest of the country.