“The kids are back at school,” wrote Westpac senior
economist Michael Gordon.
With job opportunities now much more limited than they were a year ago, more young people are staying in school or heading back to further their education. That can’t be a bad thing.
It’s worth taking a deeper look at the labour market data. Its release on Wednesday was somewhat overshadowed by a certain political event in the United States.
Figures released by Stats NZ showed the unemployment rate rose to 4.8%. That was lower than the Reserve Bank forecast and market predictions of about 5%.
On face value, that might suggest the economy isn’t as bad as many had feared. But it’s one of those nuanced “good news/bad news/maybe not such bad news” stories.
It was the kind of data that reminds us that life isn’t simple and we should be careful what we assume about statistics.
Unemployment is still headed in the wrong direction. We shouldn’t go too deep into the numbers without recognising that they represent the upheaval of real lives.
The latest (seasonally adjusted) figures showed there were 148,000 unemployed people in September. That is a 24.3% increase in the past year.
It represents an annual increase of 29,000.
The data shows the number being made redundant is also rising.
“The number of jobless people who had been employed in the last five years and left that role due to layoffs, redundancies or business closures rose 34.5% annually to 55,000 (not seasonally adjusted),” Stats NZ said.
So nearly 30,000 more unemployed people and 55,000 people lost their jobs (some of whom found more work). That’s a lot of upheaval for a lot of people.
And the lower-than-expected topline figure was flattered by a big fall in the labour market participation rate.
“A fall in participation means folk who were previously looking for work have given up doing so often because they have become disenfranchised and believe the search for work is pointless,” wrote BNZ head of research Stephen Toplis.
The participation among youth (aged 15 to 19) in particular was plummeting, he said.
So basically the unemployment rate could have been a lot worse if young people weren’t exiting the job market.
The good news is that they aren’t sitting around doing anything. Many, of course, have left the country, heading off on the big OE or just grabbing employment opportunities in Australia. A record 81,200 Kiwis left in the year to August.
That – and the decline in migrant arrivals – saw the overall potential labour force decline by 8000 people (or about 7%) in the third quarter alone.
More heartening was the news that more kids are staying in school longer or undertaking more training.
Gordon notes that, in the initial post-Covid period, the economy was running hot and the border closure meant migrant workers weren’t available.
“In this time, many young people were drawn into the labour force to fill the gap – often at the expense of study. As the economy has slowed and migration has rebounded, this group has been at the forefront of job losses,” he said.
“While this has led to a rise in the number of unemployed, we’re also increasingly seeing young people return to or remain in study, ending their job search altogether.”
Commenting on the same trend, Toplis sounded a note of caution.
“If these youngsters are instead getting themselves better educated, then this development may be no bad thing but to the extent it means low-income families now have one less earner and/or it shows businesses simply can’t take on youth now, it is worrying.”
It’s a tough one, right?
During the Covid labour shortage, when unemployment dipped to a low of 3.2%, young people were presented with opportunities to get out into the world and earn.
Thanks to Labour’s minimum wage hikes, they could walk into a decent wage in an unskilled job.
In some cases, this may have delivered vital income to poor families living below the poverty line.
But in plenty of other cases, it offered young the chance to quit school, buy a car and have some fun. If they continued to live at home, they probably had a decent amount of disposable income.
I’m not sure that was necessarily a good thing for their long-term prospects – or for the productivity of the nation.
So while I remain concerned about the damage that unemployment does to our society – and I hope we can turn this economy around fast enough to minimise the fallout to the labour market – I’m heartened by the fact that young people are heading back to school.
Education has been the key to the country’s success in the past 100 years and it will be the key to our success in the future.
Liam Dann is a senior writer and columnist who also presents and produces videos and podcasts. He joined the Herald in 2003.
