KEY POINTS:
Doom and gloom messages signal change is afoot in the New Zealand economy and the job market in the next 18 months will not escape the negativity. But there is good and bad news for workers.
"We think the New Zealand economy is sitting at the precipice of a labour market downturn, the first for a decade," says Westpac economist Dominick Stephens. "It is going to unfold slowly and steadily."
An additional 27,000 people will be unemployed, on top of the 8000 job losses mentioned in the latest figures from Statistics New Zealand, Westpac forecasts. Plus, unemployment will rise from 3.9 per cent to 5 per cent.
ASB chief economist Nick Tuffley predicts unemployment will be around 5.5 per cent by 2010, while ANZ Bank chief economist Cameron Bagrie forecasts the jobless rate will be 5-6 per cent in that timeframe.
But it is not a disaster.
"That is a big shift from where the unemployment rate is now, but over history that is still a pretty low rate," Bagrie says. "If we can get away with a peak of 5.5 per cent, it will still be a good news story."
Unfortunately, the downturn will disproportionately affect Auckland as Auckland has no dairy factories and lots of houses. The finance, real estate, residential construction and retailing industries will be hardest hit.
"For the last five years the New Zealand economy has been driven by house price increases and unsustainable spending which has created jobs in those four areas," says Stephens.
Kiwis' spending and borrowing binge is over and it is the primary and export-oriented industries which are booming. Sky high world commodity prices and a lower NZ dollar are promoting a resurgence in manufacturing and opportunities in agriculture and mining and services associated with those industries.
"The rural areas are experiencing a boom while urban areas are experiencing the crashing down of a previous unsustainable boom," Stephens says.
There will be more jobs in export-related industries. This is explained by a cyclical rotation from the spending sector to the export sector, ANZ's Bagrie says. "In a lot of industries - IT, anything to do with KiwiSaver, health, education and agriculture - there are some astonishing skills shortages across the country.
"In other sectors, growth in the economy is anaemic. In fact we are heading backwards," he says.
"So there is more attention from firms to costs. I am not predicting wholesale redundancies, but firms are looking to whether they will replace leaving staff.
"Firms are very much in a holding pattern at the moment and people are more cautious," Bagrie says.
The further north in the country, the weaker the environment is.
The outlook for wages is similar to the dichotomy in the job market. When the prices of everyday goods such as petrol and groceries go up, workers seek pay rises to alleviate the loss in take-home spending power.
But when businesses are experiencing tough times, bosses are less likely to be able to accommodate demands for wage increases.
Management may be avoiding overtime payments, cutting staff through attrition and even contemplating redundancies. Again, the economists forecast that industries will fare differently.
Employees in some, such as retailing, are likely to have no bargaining power as the employers may be looking to reduce the workforce so they don't want to pay higher to retain people, Stephens says.
"Where there are desperate skill shortages, workers will be successful in their wage claims," he says.
In the next 18 months there will be more job seekers in the market but some won't find jobs, ASB's Tuffley says. This in turn may affect the drift north to the bright lights of Auckland that has been the norm for years.
Tuffley predicts moderated wages growth over that time because, while inflation may be higher, a slower economy will hamper employers' ability to pay more.
Alas, Aucklanders will bear the brunt of the pain of higher petrol costs because they generally travel further to work, he points out.
Bagrie forecasts wage growth to be robust but he expects the pace to slow. "Some sectors will remain hot - IT, health, education, agriculture - while lower skilled staff are going to see subdued wage growth," he says.
So the message for people contemplating a job change is to research the industry well as the situation differs so widely.
IT continues to provide opportunities as the world's online life expands and evolves. With the ageing population, the outlook for the health industry is excellent as more workers will be needed. At the other end of the spectrum, the recent baby boom means there are good prospects in education.
But the hot pick is export-related jobs, especially in agriculture. With the rural picture so rosy, a move to the country will not only save on commuter petrol costs, but could lead to higher wages and a greater degree of job certainty.
