Jobs growth fails to keep pace

The Christchurch reconstruction has not yet had an effect on jobs. Photo / Sarah Ivey

Jobs growth failed to keep up with growth in the labour force during the September quarter, pushing the unemployment rate up to 6.6 per cent.

It was 6.5 per cent in the June quarter and has saw-toothed around that level for the past 2 years.

The employment rate, which is the proportion of working-age people who have jobs, has also been flat over the past two years. The latest year included the impact of the Canterbury earthquakes. The 25,000 jobs the economy added over the year to September was despite a drop of 27,000 in Canterbury.

In Auckland, by contrast, employment grew by 58,900 or 9.1 per cent over the year.

Similarly, while employment growth in the September quarter was 0.2 per cent nationwide, excluding Canterbury it was a more respectable 1 per cent.

In the September quarter the labour force grew by 7000, but employment by 5000, pushing the number of unemployed up to 157,000.

Over the year ended September employment grew by 25,000 or 1.1 per cent. But most of that is explained by an increase of 17,200 or 7.5 per cent in the number of self-employed, rather than hiring by established firms. The quarterly increase in employment was the net effect of 8000 more full-time jobs and 3000 fewer part-time ones.

For the full year most of the net employment growth was in full-time positions, which grew 1.4 per cent against 0.1 per cent for part-time jobs.

Under-employment, which measures part-timers who would prefer longer hours, has been trending down over the past two years, to 98,000 or one in five, from 122,000 or one in four in September 2009.

Goldman Sachs economist Philip Borkin said that while the peak in the unemployment rate - 7 per cent in December 2009 - was lower than in the recessions of the early 1990s and late 1990s, the rate of improvement so far had been incredibly slow, and slower than during previous recoveries.

"Consistent with our expectations of only a gradual economic recovery, particularly outside of earthquake reconstruction, we expect only a modest reduction in the unemployment rate going forward, with it reaching 6 per cent by the end of 2012," Borkin said.

Infometrics economist Matt Nolan said there was a growing divergence between the skills workers had available and the skills businesses required.

"The unemployment rate for managers and professional workers has fallen to very low levels in the September quarter, while unemployment rates for labourers and sales workers have remained high," Nolan said.

"With firms unwilling to invest in training given the current economic uncertainty, low-skilled workers will struggle to find work and it will take some time for unemployment to fall back into a more normal range."

The data were weaker than the market had expected. The consensus forecast had been employment growth of 0.6 per cent, against the out-turn of 0.2 per cent, and an unemployment rate of 6.4 per cent, not 6.6 per cent.

"Employment rose only modestly for the second consecutive quarter, and unemployment rose instead of falling. This supports our view that the New Zealand economy has endured a soft patch through mid-2011, as cooling general domestic activity has not yet been replaced by Christchurch reconstruction," Westpac economist Felix Delbruck said.

Numbers
* Increase in jobs in the year to September: 27,000
* Canterbury jobs lost: 27,000
* Auckland employment growth: 58,900