Workers downbeat about job market

New Zealand employees are more downbeat about the labour market at present, and aren't as optimistic about its future recovery.

The Westpac-McDermott Miller Employment Confidence Index fell
5.6 points to 102.6 in the September quarter, with a 4.9 point decline in present conditions to 80.1 and a 5.9 point drop in employment expectations to 117.7.

A reading above 100 indicates optimists outweigh pessimists, while below 100 is the reverse.

"Employees have become more despondent about their current employment conditions, but more importantly, they have reassessed their optimism about future conditions," said the bank's chief economist Brendan O'Donovan and economist Donna Purdue in their report.

"After showing signs of resilience in the June 2010 quarter, employees appear to have lost some faith in the economic recovery."

The survey, which is relatively new, comes as a consensus of economists' forecasts from the New Zealand Institute of Economic Research points to a slow recovery in the labour market over the coming years, with unemployment tipped to creep back up in the March 2011.

That's broadly in line with the Reserve Bank forecast from its September monetary policy statement, picking the jobless rate to hold at 6 per cent in the 2011 financial year, gradually falling back to 5.5 per cent and 5.3 per cent in subsequent years. New Zealand's unemployment rate rose to 6.8 per cent in the three months ended June 30 from 6 per cent in the first quarter, according to government data.

O'Donovan and Purdue said the increased pessimism wasn't surprising given the sharp rise in the unemployment rate, though it was "difficult to reconcile the deterioration with business surveys showing that firms are finding it harder to obtain skilled and unskilled labour."

Businesses have pared back their hiring intentions in recent months, with last month's National Bank Business Outlook showing a net 4.3 per cent of respondents looking for more staff in the next year, compared to 8.3 per cent in July.

People's earnings have improved from a year ago, with a net 21.4 per cent of respondents reporting an increase in pay, compared to a net 18.6 per cent in the June quarter, according to the Westpac survey.

Even so, wage growth is expected to lag behind inflation until 2012, when NZIER's survey forecasts pay rates to rise 3.3 per cent when prices are climbing at a rate of 2.6 per cent.

Nine of the 11 regions surveyed registered declines, with Northland, Gisborne, Hawkes Bay and Nelson/Marlborough coming in under 100, showing pessimists outweigh optimists.

Auckland and Wellington registered big declines in confidence, falling 10.9 points to 100.1 and 8.5 points to 102.3 respectively.

Earlier today, State Services Minister Tony Ryall told the Public Service Association "further reductions in core government administration staff can be expected."