The labour market in New Zealand is still extremely tight. Photo / Getty Images
The labour market in New Zealand is still extremely tight. Photo / Getty Images
Optimism about the job market has fallen to the lowest level since June 2021, according to the Westpac McDermott Miller Employment Confidence Index for the June quarter.
Whether that is good news or bad news might depend on how quickly you hope to see the economy slow and inflation ease.
The index fell by 3.9 points to 105.6 in the June quarter. While households remained positive on balance about conditions in the labour market, this was the lowest reading for the Index since June 2021, said Westpac senior economist Michael Gordon.
“Perceptions about the availability of jobs were the biggest contributor to the fall in confidence.
“This measure has traditionally given a good steer on the direction of the unemployment rate, and the latest reading suggests that we’re likely to see a further rise in unemployment over the rest of this year, from its still-low current level of 3.4 per cent”
Confidence about households’ earnings growth fell in the June quarter. This has remained at low levels since the Covid-19 shock, despite a lift in wage growth in the official statistics.
The survey showed fewer households reported a rise in their earnings over the past year, and expectations of an increase in the coming year were also down.
Both of these measures had remained at historically low levels since the Covid-19 shock, even as the official data has shown a strong pickup in household earnings growth over the past year, Gordon said.
“Our best explanation remains that people are viewing their situation in inflation-adjusted terms – even those that have been able to secure a cost-of-living pay increase probably still feel like they’re having to run hard just to stand still.”
New Zealanders remained optimistic on balance about the state of the labour market, in contrast to the slump in consumer confidence over the past year or so, Gordon said.
“That reinforces our view that weak consumer confidence has been more about the squeeze from the rising cost of living, rather than fears of recession.”
Perceptions about the availability of jobs no doubt reflected the fact that inflows of migrant workers had returned in full force since New Zealand reopened its border last year, Gordon said.
Westpac acting chief economist Michael Gordon. Photo / Supplied
“Migrants normally have a mixed impact on the labour market, helping to address skill shortages in some areas, but adding to the overall level of demand in the economy,” he said.
“But it appears that, at least for now, migrants are seen as adding more to the supply side on balance, helping to address some of the distortions that had arisen during the border closure. [For instance, more than half of the growth in employment over 2022 was among teenagers, which in many cases will have been at the expense of their education.]”
The survey was conducted over June 1-12, 2023, with a sample size of 1560. An index number over 100 indicates that optimists outnumber pessimists. The margin of error of the survey is 2.5 per cent.
Liam Dann is Business Editor at Large for the New Zealand Herald. He is a senior writer and columnist as well as presenting and producing videos and podcasts. He joined the Herald in 2003.
