Editorial: Unemployment rate puts economic gloom in perspective

New unemployment figures are to be released next week.

EDITORIAL

There’s no question economic conditions are tough, but we need to keep them in historical perspective. We shouldn’t let an undue sense of doom and gloom make things worse than they need to be.

Next week, we’ll see how much damage the recession has done to the job market with the release of new unemployment figures.

Given the prevalence of headlines announcing job losses in the past few weeks, you’d be forgiven for thinking we’re seeing some sort of large-scale economic meltdown.

We aren’t. Unemployment is forecast to rise from 4 per cent - as of the end of 2023 - to around 4.3 per cent.

To put that in perspective, this will be a lower unemployment rate than the country experienced at any time during the years of the so-called rock star economy under Sir John Key.

Of course, things are expected to get worse. The full impact of the higher interest rates is yet to flow through to those who have been on fixed mortgage rates.

The Reserve Bank and local economists are forecasting this cycle of high rates and the economic slowdown will push the unemployment rate as high as 5.5 per cent.

That is the average unemployment rate across the 38 years in which the data has been collected as a continuous series.

When unemployment dipped to just 5.5 per cent in the first quarter of 2001, it was cause for celebration - the lowest rate we’d experienced in 12 years.

At the end of 1991, the country was grappling with unemployment above 11 per cent.

None of those statistics will matter much to the thousands who have lost or will lose their jobs in the coming months. But collectively, we should take heart that the economy has seen much worse.

Unemployment has already risen sharply from a record low of 3.2 per cent at the end of 2021.

There are now signs the pace of the slowdown in the labour market may be slowing in the private sector - even as Government cutbacks see it accelerate in the public sector.

The latest data on job advertisements - from online jobs site Seek NZ - shows job ad volumes are now down 27 per cent year-on-year, and 14 per cent down when compared with March 2019.

The decline in job ads was greatest in Wellington, where they have fallen 38 per cent compared with March 2023 and are down 26 per cent compared with March 2019.

Meanwhile, competition among candidates continues to grow rapidly.

Applications per job ad rose 6 per cent from November to December (a lag month for Seek’s data), which was already at the highest recorded levels in Seek’s history.

But Seek NZ’s Employment Report for March found job ad volumes fell just 0.4 per cent compared with February. This followed a 3 per cent decline in February (compared to January).

Perhaps that represents a temporary pause. Or perhaps it is a sign the economy still has more life in it than many had predicted.

Either way, we can rest assured we aren’t headed back to the high-unemployment economy of decades past.