Risk to economy as employment confidence falls
Employment confidence has hit its lowest level in over two years, the latest quarterly Westpac McDermott Miller Employment Confidence Index shows.
The index fell 4.6 points in the December quarter, from 104.2 to 99.6. This is its lowest level since June 2009 when it stood at 96.1.
Given the storm clouds hanging over the global economy and the recent drop in the Westpac Consumer Confidence index, the result was not surprising, Westpac economists said.
Both indices dropped on the back of a sharp deterioration in households' broader economic sentiment, and taken together they signalled a risk of consumer spending retrenching in the first part of this year.
It had forecast zero growth in consumption in the March quarter as households took a breather after the Rugby World Cup, but with economic confidence this soft spending could actually fall, the bank said.
The latest result suggests households see the labour market remaining soft for a while yet. The Current Employment Conditions part of the index, which summarises households' perceptions of current labour market conditions, hasn't improved since March 2011.
The Employment Confidence Index asks people about current and expected job availability and about their personal employment situation.
The results showed households were primarily becoming more concerned about employment conditions in the wider economy, rather than their own situation, Westpac said.
On balance, 9 per cent of respondents think that national job prospects will worsen over the coming year.
People's perception of the existing job situation deterioriated - a net 62 per cent now think that jobs are currently hard to get nationwide, up from 53 per cent three months ago.
Responses to questions about personal job security and earnings fared better. The increasing gloom was offset by an improvement in reported earnings.
The balance reporting an increase in earnings over the past year rose from 21 per cent to 29 per cent. However this is still below pre-recession levels when this figures averaged around 40 per cent.
A greater sense of vulnerability was emerging among lower and middle income households, the bank said. A net 15 per cent of lower income respondents now think their jobs will be less secure in a year's time, up from 3 per cent in September and a worse result than during the recession.
A regional breakdown of the index shows employment confidence is now in negative territory in all regions except Auckland, Canterbury and Southland.