The figure is especially confounding given the wave of public sector layoffs that have hit the city as a result of the new Government’s spending cuts, which substantively began to take effect from July 1, a period captured by the most recent data.
Wellington appears to have defied the gloomiest prognostications of its doom – the Bordeaux Bakery might have closed, but Gallic newcomer Le Bouillon Bel Air was so popular on Wednesday night that it ran out of creme brulee – but can things be really that good?
A 4.2% unemployment rate is pretty good during normal times, let alone in the midst of a recession, which, as Treasury noted on Thursday, has been deeper in per capita terms than the 2008/09 financial crisis.
The short answer is, no, things probably aren’t that good, and while the data does capture three quarters of retrenchment and one quarter of the new Government’s Budget, it might not capture the full impact of the public service cuts, given the length of time it can take to implement a restructure.
Infometrics chief executive and principal economist (and Wellingtonian) Brad Olsen reckons there’s a bit more to the story than meets the eye – and it isn’t all good news.
He cautions that Stats NZ’s regional breakdowns have a higher margin of error, so what we might be seeing isn’t an unemployment rate that’s steady or heading down, but “noise”. Regional unemployment figures also aren’t seasonally adjusted, so again, it’s quite difficult to make a clear comparison between quarters.
Infometrics publishes its own Quarterly Economic Monitor (QEM) which takes Stats NZ data but uses an annual average figure at a regional level to smooth out the regional “noise”. The latest QEM, published today, had the Wellington regional unemployment rate at 4.1% in September, although instead of the figure being static, the figure showed an increase on the last quarter.
Olsen noted that there were other signs of pain in the region, including annual average Jobseeker Support numbers up 16% pa (compared with 12% for NZ), and filled jobs growth for Wellington up 0.4% on average over the 12 months to September 2024 (compared with 1.2% pa annual average growth for NZ).
“Both Wellington city and Wellington region have weakened, but not quite as much as everyone might have been expecting.
“Over the year to September 2024, the number of filled jobs in Wellington is effectively flat. That comes at a time when jobs nationally were up. Wellington numbers might not look abysmal [but] they’re certainly not strong or as good as the national figures,” he said.
He said these stats “all tell a story of a weaker labour market”.
Other factors could also be helping to keep the unemployment rate low, including people moving out of the labour force, going into training, or moving overseas.
On the other hand, Olsen noted that Seek data showed ads for jobs in Wellington were up and those for jobs in the Government and Defence had been increasing over the past two months.
Olsen said that overall, Wellington’s economy was neither as dire as its critics claimed, nor as rosy as its boosters suggested.
Another interesting datapoint in Wellington is the relation between traffic volumes and economic growth. Traffic volumes tend to be a good proxy for economic growth, with the volume of trucks often correlating with GDP and the volume of light vehicles providing a leading indicator on where GDP growth might go.
The Infometrics data combines the two into a single measure and Olsen cautioned that recent data collection gremlins mean the figure should be treated with caution and it might be worth waiting before drawing conclusions.
Nevertheless, traffic volumes fell dramatically in the September quarter relative to a year ago, plunging by 10.5% and 8.9% in Wellington city and region respectively, while provisional GDP estimates suggest the city’s GDP grew by an annual average of 0.6% and the region’s economy grew by 0.1%, suggesting a slight detachment of traffic in Wellington as an indicator for GDP.
In Auckland, traffic volumes were down 1.4% while GDP growth was flat, suggesting a stronger relationship.
Olsen said Wellington was a different economy. Auckland had a more diverse economic base, part of which relied on heavy traffic to move goods in South Auckland.
“Wellington is more of a weightless economy and more services based,” he said.
But another contribution, Olsen said, could be Wellingtonians’ relatively high use of “different modes of transport, particularly public transport”, which might be detaching traffic volumes from GDP.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
