Winners and losers in Auckland recovery
Auckland's economy is recovering but not everyone is benefiting, new figures show.
A report by Auckland Council chief economist Geoff Cooper shows unemployment in the Auckland region dropped to 6.3 per cent in the December quarter. That was down from 7.2 per cent a year earlier and the lowest rate since 2008.
"Overall, we are starting to move from a regional economy that had patches of success to one that has patches of failure," Cooper said.
In the year to December, Auckland employment rose by 48,000 people, a gain of 6.7 per cent.
"These are impressive statistics considering the sluggish employment performance in the six months to June and the significant additions to the working-age population through the year."
The Auckland unemployment rate could fall quickly if employment growth was sustained above 3 per cent, Cooper said.
"There has been a long lag since the global financial crisis but employment is now coming through. We are expecting unemployment to track down to 5 per cent over the next 12 months."
However, the improvement in the labour market had so far failed to lead to an increase in wages for most people.
Average weekly earnings growth for fulltime equivalent employees fell from 3.5 per cent to 3.3 per cent, according to the report.
Annual growth in the labour cost index, which takes into account changes in industry and occupation shares, also fell by 1.6 per cent.
While the recovery in the Auckland economy was broad-based, employment-rate increases were not evenly spread and some occupations were faring better than others, Cooper said.
More managers and professional services personnel were being employed but fewer machine operators, trades workers and administration staff.
Youth unemployment was still at "elevated" levels, Cooper said.
Unemployment in the 20 to 24 age group had fallen from 14.6 per cent in the third quarter of last year to 11.4 per cent in the final quarter. Unemployment among 15 to 19-year-olds had risen from 22.5 per cent to 27.2 per cent.
Auckland Mayor Len Brown yesterday announced that the Auckland Council would set up an office to co-ordinate the efforts of the council, local boards and businesses to boost youth employment.
The report highlights increased housing activity, consumer confidence and net migration as the current drivers of Auckland's economy.
Housing activity continued to gain momentum, with volumes of work 17.9 per cent higher year-on-year in the December quarter.
House-price growth remained solid in the first two months of this year, but house sales continued to weaken, while rental inflation was running at a modest 2.9 per cent in February.
"The LVR [loan-to-value ratio] limits have significantly reduced demand for housing, but solid activity at the upper end of the market has propped up house-price growth," Cooper said.
Net migration into Auckland reached a 10-year high, with 13,700 migrants arriving in the year to February. This level of inflow had a stimulating effect on the Auckland economy, but it also had implications for housing and infrastructure, Cooper said.
High net migration numbers were boosting housing demand, but the combination of the LVR limits and rising interest rates would have a dampening effect.
Rising construction costs caused by the Christchurch rebuild had started to spill over to Auckland and inflationary pressures were on the rise, the report warned.
"We've got two of our biggest cities growing at the same time. Eventually we are going to run into capacity constraints," Cooper said.