More jobs, better pay, so why isn’t the economy really humming?

Money, global economy, NZ Dollar, consumer spending

The Kiwi workforce is bigger than ever and many workers are commanding all-time record salaries.

But inflation is still corroding spending power and some expectations are that the country’s economy shrank in the September quarter.

Trade Me Jobs on Thursday reported buoyant wage growth, with average pay for some sectors leaping as much as 20 per cent year-on-year.

And Trade Me Jobs sales director Matt Tolich said in this year’s third quarter, annual average salary increases on the platform outstripped inflation for the first time.

Roofers had a 17 per cent jump in salary to $81,516 and four other professions did just as well or better.

But the jobs data represented just one part of the equation, Westpac senior economist Darren Gibbs said.

“Clearly, the economy is slowing.”

Despite remarkable workforce growth, Gibbs still forecast the economy to have contracted slightly in the September quarter.

Barely a year ago, a crushing labour shortage was squeezing sectors including hospitality and tourism.

But Gibbs said a huge surge of workers changed that.

It wasn’t just tens of thousand of immigrants - Gibbs said more locals were joining or rejoining the workforce, or staying in work for longer.

Migrants who arrived to fill vacant jobs needed to spend money, and engage in other activities, stimulating even more job creation.

“Once that pipeline had passed you would expect to see employment growth slow,” Gibbs added.

“Employment growth has probably slowed from where it was in the first half of the year.”

In the past six months, the unemployment rate had increased even as the country had more than 3 per cent annual employment growth.

That was probably unprecedented in the country’s history, Gibbs said.

More senior citizens were staying in the workforce or looking for work than before, and more young adults trying their luck in the job market, Gibbs added.

More women were also making themselves available for work, Gibbs said.

The unemployment rate in last year’s September quarter was 3.3 per cent. It sat at 3.4 per cent for the next two quarters, then reached 3.6 per cent in the June quarter.

September quarter job data from Statistics NZ is not due until November 1.

He said although Trade Me Jobs found average wage growth of 8 per cent outstripping inflation, the overall national picture would likely be salary growth in line with inflation.

June quarter CPI inflation was 6 per cent, year-on-year.

The food price index is due on October 12 and the consumers price index (CPI) on October 17.

The Trade Me data came just nine days after the Seek job site reported advertised salaries in New Zealand outpacing those in Australia for the second quarter running.

The US seems to have been able to wade its way out of recession. Photo / J. David Ake, AP

The Reserve Bank this week said with monetary conditions staying restrictive, spending growth was expected to decline further.

“Globally, economic growth remains below trend and headline inflation has eased for most of our trading partners,” the central bank’s Monetary Policy Committee said.

And it said weakening global demand was putting downward pressure on New Zealand export volumes and prices.

Globally, the United States economy is growing modestly.

“The positive data we’ve seen so far this year seems to be striking down the ‘wall of worry’ over the potential of a recession in the near term,” US Bank Wealth Management director Rob Haworth said last Friday.

But China was sluggish, with a property market in some turmoil and high youth unemployment.

ANZ chief economist Sharon Zollner in August said the current economic landscape was one where “good news might be bad news in disguise”.

Zollner then said signs of resilience in consumer spending, business activity, hiring, and house sales could in practice raise risks of the Reserve Bank raising the Official Cash Rate again.

The upshot, perhaps, is the economy is actually humming - if you’re a roofer aged 23 with no mortgage and a high-interest savings account, or a 66-year-old willing to work and with your house paid off.

John Weekes is online business editor. He has covered courts, politics, crime and consumer affairs. He rejoined the Herald in 2020, previously working at Stuff and News Regional, Australia.