Data Flash (New Zealand)
NZ: Household Labour Force Survey - Q3 2001
Key Points
Today's Household Labour Force Survey (HLFS) confirmed the softer Q3 labour market performance that was indicated by
Monday's Quarterly Employment Survey (QES).
Employment rose 0.3% qoq in Q3. This follows a revised increase of 0.8% qoq in Q2. The level of employment was 2.2%
higher than a year earlier. This result was bang in line with market expectations.
Full-time employment fell 0.3% qoq but was still 1.4% higher than a year earlier. Part-time employment increased 2.4%
qoq to be 4.4% higher than a year earlier.
On a full-time-equivalent basis (one full-time worker equals two part-time workers) employment rose by 0.1% qoq -
exactly in line with the QES outcome. On an industry basis, strong growth was again recorded in the health and community
services sector and in the wholesale and retail trade sector.
However, this was largely offset by a strong fall in employment in the manufacturing sector and in the transport,
storage and communications sector. Sector data is volatile and should be treated with caution.
On a regional basis, the South Island accounted for all of the aggregate employment growth recorded during the quarter.
In the North Island, the Auckland region was flat while employment growth in the central North Island was offset by
lower employment levels in the Wellington region. Regional data is volatile and should be treated with caution.
The number of total hours worked rose 0.1% qoq in Q3 to be 1.1% higher than a year earlier.
The unemployment rate was unchanged at 5.2%, bang in line with market expectations.
The participation rate was unchanged at 65.9%.
The entire reduction in the level of unemployment over the past year has been met by a reduction in those persons
classed as long-term unemployed (unemployed for 6 months or longer). This suggests that the structural rate of
unemployment is likely to have fallen over the past year.
Comment
Both the HLFS and QES suggest that the pace of employment growth has moderated in recent months from the strong rates
achieved over the past year (a conclusion supported tentatively by the ANZ jobs ad survey). With productivity growth
having slumped over the past year, a moderation in employment growth was to be expected.
Going forward, we expect that this adjustment will be accelerated. With the US and Japan in recession, Europe flirting
with recession, and the risk that further terrorist attacks delay the expected global recovery, increased uncertainty in
the business community regarding New Zealand's near-term economic outlook seems likely to lead to a more cautious
approach to recruitment decisions. In aggregate, we expect only modest levels of employment growth over the next 12
months.
Today's data, in combination with recent developments in surveyed measures of skill shortages, suggests that, while the
labour market remains tight, the degree of tightness has not intensified over recent months - an outcome that will be
welcomed by the RBNZ. Moreover, given our view of the outlook for employment, some easing of labour market conditions is
likely to occur over the coming year. This should help to contain the excess demand pressures that, in our view, would
have otherwise resulted in a substantial and sustained rise in labour costs, and ultimately, core inflation.
The employment and hours worked data, combined with our expectation of a very modest improvement in productivity,
suggests an element of downside risk to our preliminary estimate of around 0.6% qoq GDP growth in Q3. If tomorrow's
retail sales data prints in line with our below-market expectation (Q3 volumes: DB 0.2% qoq, market 0.6% qoq), an
outcome of 0.4% qoq would appear to be closer to the mark. Such a result would need to be seen in the context of the
very strong outcome in Q2 (+2% qoq). The direct and indirect impacts of the electricity crisis are also likely to have
subtracted 0.2%-0.3%pps from output during Q3. Looking ahead to 14 November, we find nothing in today's release to
change our view that the RBNZ will share the market's conclusion that a 50bps easing in the OCR seems prudent at this
stage, especially given that the next scheduled policy review will not take place until 23 January.
Darren Gibbs, Senior Economist, New Zealand
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