Peak salary? Advertised salaries hit record, but the market is cooling

Strong demand for labour has pushed annual advertised salary growth to its highest recorded level, according to new data from Seek.

But there are signs salaries are starting to cool amid a softening jobs market which looks set to continue for the rest of the year.

Advertised salaries grew by 4.7 per cent in the year to May 2023 - the fastest pace since data began in 2016 - according to Seek New Zealand’s Advertised Salary Index (ASI) released today.

Meanwhile quarter-on-quarter advertised salaries grew at a slower rate of 1.0 per cent compared to previous quarters.

Seek NZ country manager Rob Clark said despite record annual growth, it is seeing signs that salaries are starting to cool.

“The quarter-on-quarter growth in the ASI peaked in the May quarter of 2022 and has declined since,” Clark said.

“That will be a function of the supply and demand. We’ve obviously come out of a pretty tight labour market. We’re starting to see that turn but these sorts of things take a little while to change from an advertised salary point of view.”

Another factor pointing to cooling advertised salaries was that Seek’s ASI was starting to align with Stats NZ’s Labour Cost Index (LCI), Clark said.

The Labour Cost Index measures the change in wages for all jobs, compared with Seek’s ASI which measures the change in advertised salaries for vacant roles.

Advertised salaries tend to respond more quickly to changes in market conditions than wages for existing staff.

“Last year we saw the advertised [salaries] increase at a faster rate than existing roles and that was a function of the tight labour market. They’re now starting to converge which indicates the market’s softening and as a consequence of that, the sort of more stable talent pool is having to compete a bit more for roles because there’s just fewer of them,” Clark told the Herald.

“[When] you’re trying to attract talent in a really tight market you generally have to advertise a little more [salary] than perhaps you’re paying or increasing your existing folk.

“The pendulum has certainly tipped in favour of employers versus this time last year.”

Stats NZ’s LCI, released in early May, increased 4.3 per cent for the March 2023 quarter, compared with 4.1 per cent in the year to the December 2022 quarter.

Both indexes still lag inflation, however, which came to 6.7 per cent in the year to March 2023.

Construction had the fastest yearly advertised salary growth of any large industry at 6.6 per cent. It was also up 1.6 per cent between the February and May quarters.

Advertising, arts & media, a relatively small industry with somewhat volatile salary trends, grew at 7 per cent in the year to May, with no quarterly change.

Design & architecture and engineering both experienced strong advertised salary growth at 6.7 per cent year-on-year.

Advertised salaries in hospitality & tourism rose 5.8 per cent year-on-year and were up 0.8 per cent for the May quarter when compared with the February quarter.

Construction had the fastest yearly advertised salary growth of any large industry at 6.6 per cent. Photo / NZME

Several white-collar professional industries experienced sluggish year-on-year growth in advertised salaries, including marketing & communications (up 1.9 per cent), human resources & recruitment (up 2.5 per cent) and banking & financial services (up 2.7 per cent).

Banking & financial services was the only industry to experience negative quarterly growth (-0.2 per cent).

Advertised salaries for the education & training industry were up 3 per cent in the year to May 2023.

Accompanying data from Seek - its Employment Report for May which was also released today - showed job ad volumes declined 5 per cent in May when compared with the prior month.

“That is reasonably significant compared to what we’ve seen over the last few months,” Clark said.

It’s the second consecutive fall in monthly job ad volumes following a 1 per cent decline in April.

Year-on-year job ad volumes were 22 per cent lower compared to May 2022, when job ads were at their highest on record.

Clark referenced employment data forecasts when looking ahead for job ad volumes.

Reserve Bank Governor Adrian Orr told the Institute of Finance Professionals (INFINZ) annual conference last October that interest rate hikes needed to tame inflation would mean higher unemployment.

Unemployment is forecast to peak at 5.3 per cent. The official unemployment rate currently sits at 3.4 per cent for the March quarter, according to Stats NZ.

Labour force participation, which increased to 72 per cent, and the employment rate, which increased to 69.5 per cent, are both at record highs.

“Typically we find an inverse relationship between the unemployment rate and the number of jobs on Seek,” Clark said.

“At the moment we’ve got a slightly unusual situation where we’re got a softening in job volumes but unemployment has remained relatively low, so there’s obviously a lag effect there we think.”

The national decline in monthly job ads was driven by Wellington (down 8 per cent), Auckland (down 3 per cent) and Canterbury (down 3 per cent).

Gisborne and Marlborough were the only regions to record an increase in month-on-month job ads, up 11 per cent and 1 per cent respectively.

Meanwhile, applications per job ad rose 13 per cent from April to May.

“What you’ve got now is a talent pool that’s applying for fewer number of jobs so it’s a bit more competitive than perhaps this time last year where there were lots of jobs relative to the number of applicants,” Clark told the Herald.

Adding to this pressure was rising migration numbers.

Last week’s Stats NZ data showed migration was still running hot, with New Zealand’s population adding a net migration gain of 72,300 for the year to April.

However, the rate of monthly migration for April (a net gain of 5800) had sharply slowed compared with earlier in the year when there were gains of more than 13,000 in February and March.

“We’re seeing quite a large increase in immigration so that impacts the talent pool. That’s good news for certain sectors, often in areas like aged care, nursing and hospitality and tourism,” Clark said.

“Corresponding to that the most searched term on Seek at the moment happens to be Visa sponsorship. That’s indicative of a lot of people wanting to move to New Zealand to find employment.”

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports.