A telling photograph appeared on the front of the Herald late last month. It showed a queue of job applicants stretching hundreds of metres around a South Auckland warehouse being used as an interview centre. The accompanying report said 2500 people had turned up to apply for one of 150 jobs at a new supermarket. They were undeterred by the low pay and unsociable hours of many of the positions. Now, a statistical dimension has been added to that picture through figures that show an unemployment rate of 7.3 per cent, the highest level since 1999. Amid all the talk of a recovering economy, this is a sobering jolt.
The unemployment statistics were worse than had been predicted by the Reserve Bank, the Treasury and the Labour Department. And they supplemented other data released last week that showed wage and salary earners' combined pay grew just 1.9 per cent in 2009, the result of fewer employees, shorter hours and pay rises that were the exception, not the rule. The consequences for retailers and other businesses chasing the consumer dollar are as apparent as they are sombre.
Such statistics are indicative of an economy that has failed to pick up a robust head of steam despite positive signs, notably growth in key New Zealand markets, especially Australia and China. Even there, a question mark hangs over the sustainability of the recovery once unprecedented monetary and fiscal stimulus is removed. All this adds weight to the case of those who believe this country will not enjoy a strong V-shaped recovery from recession. There are not the healthy household finances for that, and many people are choosing to save rather than spend.
Instead, we appear to be in for an L-shaped period, with somnolence the major characteristic of the economy over the next six to 12 months.
All is not gloom, however. Unemployment statistics are a lagging indicator. They will be among the last to show signs of revitalisation in the same way that their deterioration postdated the worst of the downturn. Nonetheless, it will be some time before enough employers have the confidence to take on new staff.
In the December quarter, a slight fall in the number of people employed was in line with expectations. That represented a substantial improvement from the previous three quarters and suggested a corner had been turned. The problem lies in the number of people entering the labour force and unable to find work.
A further factor was the number of New Zealanders who have returned home to, or decided to stay put in, what they hoped would be a relatively recession-proof haven. Some of these people are, undoubtedly, now looking towards Australia, which has an unemployment rate of just 5.5 per cent.
The Government is quick to point out that New Zealand is still, relatively, better off than most countries. The United States has a 10 per cent unemployment rate. Further, the rate here is unlikely to worsen substantially. First, however, there is likely to be a recovery in hours worked as companies that elected to cut these, rather than staff, reverse the process. Only after that will confidence in the economic recovery spark a lift in hiring. Increased wages will trail that, the product of a tightening labour market.
The weaknesses in the latest data raise the possibility that the Reserve Bank may delay its raising of the official cash rate. The Governor, Alan Bollard, repeated last week that he intended to start raising the rate "around the middle of 2010". Companies' hiring intentions will be one of the key indicators that determine when he decides a "self-sustaining" recovery is under way. Those who came into the job market at the end of last year will hope employers' pre-Christmas caution quickly lifts.