KEY POINTS:
New Zealand's unemployment rate increased to 4.2 per cent in the September quarter, the highest rate since the end of 2003, but data released today was less gloomy than expected.
Despite the increase in the unemployment rate, with the total labour force also growing the number of people working was also up slightly, to the highest level since the Household Labour Force Survey started.
Statistics New Zealand's (SNZ) figures showed the seasonally adjusted number of people employed increasing 0.1 per cent in the quarter to 2.17 million, while people unemployed rose 6.3 per cent or 6000 people to 94,000.
The labour force participation rate nudged ahead by 0.1 percentage points in the quarter, to a record-equalling high of 68.7 per cent.
The median predictions of economists in a Reuters poll was for a participation rate of 68.3 per cent, an unemployment rate of 4.3 per cent, and a 0.6 per cent fall in employment for the quarter.
After falling throughout 2007, the unemployment rate has increased in the first three quarters of this year.
With the economy having been in recession since the start of the year, a material deterioration in the labour market was expected to follow, with business confidence surveys pointing to falling employment intentions.
But do they point to a glimmering hope among the doom-laden financial news, or a brief respite before the real trouble hits? Two economists have different thoughts about the implications of these better-than-expected unemployment figures.
"Don't be fooled by the headline increase in the unemployment rate" said ASB economist Jane Turner in a report just published. Underneath this result the labour market had "managed to hold its own" over the third quarter.
There had been slightly more jobs created in the quarter, which was in contrast to expectations of a decline in numbers employed, she said.
This rise in the unemployment rate was due to "a surprising increase" in the participation rate. Had this not increase, then unemployment would have been lower.
But the big picture was that the labour market had deteriorated over the past year as employment growth stalled in 2008. The deterioration in global financial markets over October and the uncertainty which prevailed was likely to drive a fall in employment over the next quarter.
So, said Turner, there was no change in the belief that the "employment picture" will deteriorate, but today's result "does imply is a stronger starting point for the NZ economy, particularly the household sector."
Today's data was "a timely reminder that there are still some economic positives in a market filled with bad news," said Turner.
Robin Clements, a Senior Economist at UBS, was gloomier than the ASB's Turner. He said that the new data "presents a picture of a more resilient than expected labour market."
"However, we don't see this picture holding together."
Employment data had been unusually volatile over the past year, so he was cautious about reading too much in quarterly movements.
"Moreover, the industry data highlights the potential for deterioration in the quarters ahead, likely driven by construction, manufacturing and retail."
Annual average employment growth in the year to the September quarter was 1 per cent, the lowest since 1999.
Clements says that the bottom-line is that while the data was "not as bad as anticipated, all indications are that there is worse to come for the labour market."
"Unemployment rose around 1.5 percentage points during the 1997/98 recession and there is no reason to expect anything less this time. In other words, we could be around half way there, on track to an unemployment rate over 5 per cent by early next year."
SNZ said the male unemployment rate increased by 0.3 percentage points to 4.2 per cent in the September quarter, while the female unemployment rate increased by 0.1 percentage points to 4.1 per cent.
The number of people employed rose 3000, with male employment down 5000 or 0.4 per cent, while female employment rose 8000 or 0.8 per cent. That followed a number of large changes in female employment in recent quarters, SNZ said.
Female employment reached 1.02m, the highest level since the survey started. Female fulltime employment was up 6000 and part-time up 2000, while male full-time employment grew a "modest" 0.1 per cent and male part-time employment was down 5000.
The rise in the labour force participation rate to 68.7 per cent was a result of a 0.4 percentage point rise in the female labour force participation rate to 62.6 per cent, while the male rate fell 0.4 percentage points to 75 per cent.
Total number of actual hours worked per week decreased 0.9 per cent seasonally adjusted in the September quarter, although the number of usual hours worked was up 0.6 per cent.
- NZPA/HERALD ONLINE
