Jobless rate well below forecast

The proportion of the population who are working or seeking work has dropped. Photo / Doug Sherring

Not bad, considering ... but still pretty bad. That was the tenor of market economists' reaction to the March quarter jobs data released yesterday.

The economy shed 24,000 jobs, or 1.1 per cent of the total, in the first three months of the year, the steepest quarterly decline for 20 years. It wiped out all the employment growth of the second half of 2008 and then some.

It pushed the unemployment rate to a six-year high of 5 per cent, from 4.7 per cent three months ago. The number of unemployed rose 7000 to 115,000.

Hardest hit were the young - those under 25 accounted for half the drop in employment - and Pasifika and Maori, whose unemployment rates jumped to 13.1 and 11.9 per cent respectively. The only age group to record an increase was the 60 to 64-year-olds.

Most of the decline was in part-time employment, down 3.1 per cent, while full-time employment was down 0.7 per cent.

The drop in employment was in line with market expectations but the unemployment rate came in well below the 5.3 per cent forecast.

The reason is that while 7000 were added to the ranks of the statistically unemployed, 17,000 withdrew from the labour force altogether. To count as unemployed a person needs to be not only jobless but actively seeking work.

The labour force participation rate, which is the proportion of the population aged 15 or over who are either working or actively seeking employment and available to start straight away, dropped from 69.1 per cent in December, an all-time high, back to a more normal 68.4 per cent.

Wider measures of slack in the labour market deteriorated too. The jobless - all those who do not have a job but want one - rose 20,000 to 224,000 and the underemployed - part-timers who would prefer to work longer hours - rose to just under 100,000, a five-year high.

But economists pointed to the fact that employment had still increased, by 18,000 or 0.8 per cent, over the year to March even though the economy was in recession all through that period. Economic output is thought to have fallen by some 2 per cent over the same period.

ANZ National Bank economist Philip Borkin said the large disconnect between employment growth and GDP suggested firms had been hoarding labour.

ASB chief economist Nick Tuffley said the employment result was relatively resilient considering the economic backdrop.

"Firms are doing their best to hold on to staff," he said. "Anecdotally, although the news headlines have been pessimistic we have heard stories of businesses adopting more flexible practices to protect jobs."

Deutsche Bank economist David Plank also sees evidence of labour hoarding in the fact that employment fell only modestly - by 11,000 or 0.5 per cent - over the December and March quarters combined despite very weak business sentiment, a "simply horrible" global environment and continued falls in output.

"If businesses start to see a light at the end of the tunnel we may escape this recession with unemployment peaking at a relatively low level, certainly well below double digits."

But David Lowe of the Northern Employers and Manufacturers Association said yesterday's jobs data, and Wednesday's wages data, were historical and did not reflect the fast pace of change.

"It does not include the large number of people laid off last month," he said. '

The jobless rate in Australia has unexpectedly dropped to 5.4 per cent in April from 5.7 per cent in March, according to official data released yesterday. Economists had expected a rise to 5.9 per cent.

WORLD JOBS

Unemployment rates:
* New Zealand: 5 per cent
* Australia: 5.4 per cent
* United States: 8.5 per cent
* Britain: 6.7 per cent
* Eurozone: 8.9 per cent
* Spain: 17.4 per cent

The proportion of the population who are working or seeking work has dropped. Photo /