Job growth stalls as labour market tightens, but party not over just yet

The labour market is tightening with new jobs falling, according to JobAdder. Photo / 123RF

Job growth stalled towards the end of 2022 as labour market conditions in New Zealand continued to tighten, according to a new report.

But the test will be the first six months of 2023, says an industry expert.

Recruitment software company JobAdder released its Global Industry Report 2022 this week, which canvassed data from the last two quarters of the year from their agency accounts across New Zealand, Australia, the UK, the United States and Canada.

The report found new jobs per account fell significantly by year-end, dropping from a quarterly high of 59.3 in Q3 to 53.0 in Q4.

In comparison, agency users in Australia were creating an average of 58.9 jobs in Q4, but this too had sharply declined from 66.3 in Q3.

The number of applications per job in New Zealand also increased to 13.4 in Q4 last year compared with 8.5 in Q4 of 2021.

But JobAdder recruitment adviser Greg Savage said the party wasn’t necessarily over, so to speak.

“What has happened is we have gone from an unprecedented boom with jobs pouring in, to a good, strong market,” he said.

“Plenty of people are being hired. Right now, there is no bust in job demand. Just a correction.”

He said hiring demand in New Zealand in the middle part of 2022 had been frenetic – if anything more severe than Australia.

“The mood shifted considerably in the final quarter of 2022. Employers became more cautious, and some candidates began to lose confidence as well.”

The threat of a recession, engineered by the Reserve Bank, looms in 2023.

A string of post-Christmas data will provide the Reserve Bank plenty to think about as it weighs up a 50 or 75-basis-point hike to the official cash rate later this month.

Today Stats NZ said the seasonally adjusted unemployment rate was 3.4 per cent in the December 2022 quarter, compared with 3.3 per cent last quarter.

This data followed last week’s headline inflation figure of 7.2 per cent for the 12 months to December 2022.

Meanwhile, retail card spending in December dropped for the first time in nine months, suggesting spending power was weakening. This included a steep fall in durables, or household items.

All this could see the Reserve Bank moderate its interest rate hikes going forward.

The four major banks in New Zealand have all revised their OCR outlooks over the past couple of weeks.

BNZ lowered its forecast peak to 5 per cent, from 5.5 per cent. Kiwibank economists also see the OCR – currently 4.25 per cent – peaking at 5 per cent.

Both Westpac and ANZ economists predicted the rate to peak at 5.25 per cent.

Savage said the 2023 election will also have an impact on confidence.

“The opposing parties have dramatically different policies in so many areas that will affect confidence and skills availability.”

Savage said as New Zealand enters a downturn, it was critical to avoid past mistakes.

“Specifically, we must all get off the ‘recruitment see-saw’,” he said.

“In 2020 and part of 2021, we had a shortage of jobs, so we fired 60 per cent of our recruiters. In 2022, job growth boomed, and we lacked candidates, so everything was about accessing candidates, candidate care and hiring back all those recruiters. As the market shifts, it will all become about clients again.”

According to JobAdder’s report, New Zealand was trailing Australia when it comes to filling permanent replacements in Q4, averaging 35.1 days compared to 31.7 days across the Tasman.

“Candidate shortages were previously an ongoing issue for recruiters as high job growth fueled demand and employees and candidates exercised unprecedented power in the employment market. As a result of slower growth, immigration, and sector-wide layoffs, this extraordinary imbalance between job demand and candidate undersupply will shift this year,” JobAdder chief executive Martin Herbst said.

“This means recruiters will have more time to dedicate time for forward-planning instead of racing to fill never-ending positions.”