Brian Fallow

The Economics Editor of the NZ Herald

Pick-up in job market likely to be modest

Over the next five years, the Labour Department expects the economy to add around 200,000 jobs. Photo / Martin Sykes
Over the next five years, the Labour Department expects the economy to add around 200,000 jobs. Photo / Martin Sykes

Labour market numbers due out this week are expected to show a modest pick-up in job creation in the last three months of 2011 but barely enough to nibble at the unemployment rate.

Between the March and September quarters last year the number of people employed grew by just 6000 or 0.3 per cent.

Market economists are picking an increase of 0.4 per cent for the December quarter, due to be released on Thursday, and a fall in the unemployment rate from 6.6 per cent to 6.5 per cent. It has been wobbling around a flat trend line of 6.5 per cent for the past 2 years.

It is expected to come down this year as the construction industry recovers from its slump, buoyed not only by the rebuilding of Christchurch but a legacy of leaky homes work, the need to upgrade the seismic resilience of many public and commercial buildings and some pent-up demand from the low levels of residential construction over the past few years.

Consensus forecasts have the unemployment rate falling to 5.8 per cent by March next year and 5.1 per cent a year later.

Over the next five years, the Labour Department expects the economy to add around 200,000 jobs. But on Statistics New Zealand's projections, three out of five of them would be required to mop up growth in the labour force.

As far as the December 2011 quarter is concerned, Westpac economists are picking 0.5 per cent employment growth - decent, they say, but not stellar - and they do not think that will be enough to bring unemployment down from September levels.

The New Zealand Institute of Economic Research's quarterly survey of business opinion recorded an uptick in hiring in the December quarter.

But it also found a small increase in the number of firms saying staff had become easier to find.

And the Westpac McDermott Miller employment confidence survey, which surveys households rather than businesses, found more of them think jobs had become harder to get than in September.

ANZ's tracking of job advertisements in newspapers and on line points in the same direction.

Its composite job ads series fell a seasonally adjusted 3.2 per cent in December and on a three-month rolling average has now turned firmly downwards.

"It still suggests the unemployment rate will fall over the next couple of out-turns, given the current rate is 6.6 per cent," ANZ economist Sharon Zollner said.

"However, beyond this the indicator is less optimistic, suggesting the unemployment rate will begin to rise again. We suspect concern about growth in our trading partners is causing local firms to defer hiring plans."

An unemployment rate at these levels does not suggest a lot of pressure on wages. The market expects today's labour cost index to record an increase of 0.5 per cent for the private sector in the December quarter.

"On balance, that points to wage growth somewhat below the December quarter average of about 0.6 per cent, and at 2 per cent, fairly modest annual wage inflation," said Westpac economist Felix Delbruck.

- NZ Herald

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