By BRIAN FALLOW
An unexpected drop in the unemployment rate in the June quarter masks a weakening of the labour market.
The unemployment rate fell to 6.1 per cent from 6.4 per cent in March and is the lowest since December 1996, when it was 6 per cent.
But the number of New Zealanders employed also dropped 12,400 on an unadjusted basis, or 4000 (0.2 per cent) seasonally adjusted. Full-time employment fell 0.6 per cent.
The fall in employment follows a 0.3 per cent decline in the March quarter and is consistent with a declining trend in job advertisements. Business confidence surveys are also reporting a fall in hiring intentions.
The apparent anomaly of employment and unemployment both falling reflects a steep rise in the third component of the working-age population, those not in the labour force.
This group, currently 1,018,000, comprises everyone over 15 who is neither employed nor actively seeking work. They are not counted when calculating the unemployment rate.
Their ranks were swollen by 27,600 (or 15,000 seasonally adjusted) in the June quarter, an increase Statistics New Zealand puts down to an unusually large number of students moving from being employed to not being in the labour force.
That would mean they neither had part-time jobs nor were seeking work.
Other categories like the retired and the discouraged did not materially change.
ANZ Bank economists doubted that the student factor explained all of the decline.
"We are more inclined to believe that this was a statistical anomaly which will reverse over the next quarter or two, as has generally been the case in the rare instances in the past when such a sharp change in the participation rate has occurred."
The employment data are derived from a large sample survey, with 15,000 households representing about 30,000 people, but there is still a margin of error around its numbers - often larger than the changes that drive the headlines.
When Statistics NZ reports a drop of 12,200 in the number unemployed, for example, it is really saying it is 95 per cent certain the number dropped somewhere between 800 and 23,000.
WestpacTrust said the drops in full-time and total employment confirmed the weak state of the domestic economy and firms' nervousness about hiring.
But Deutsche Bank said growth in PAYE tax revenue was much stronger than the household labour force survey suggested, so the estimated drop in employment could overstate the weakness of the labour market.
"We doubt the Reserve Bank will read too much into the fall in the unemployment rate.
"We expect that [labour force] participation will rebound somewhat in the September quarter, leading to a rise in the unemployment rate."
Had the rate remained at March quarter levels, unemployment would have come in at 6.8 per cent, it said.
Accentuating the positive, Employment Minister Steve Maharey pointed to the annual figures - 16,000 fewer unemployed, 17,000 more employed overall, including 28,000 more full-timers.
"The decrease in Maori unemployment is particularly welcome. Maori unemployment is now 13 per cent compared with 18.2 per cent a year ago."
But National's employment spokesman, Bob Simcock, preferred to focus on the latest half-year.
"Under National an average of 19,000 jobs were created every six months since September 1991," he said.
"Six months of [Deputy Prime Minister] Jim Anderton's job machine and we've got 10,000 fewer people in work."
Jobless down - but so are those in work
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