Jobless data affected by glitch

TONY ALEXANDER

Last updated 09:17 16/11/2012
Tony Alexander
Fairfax NZ
BNZ chief economist Tony Alexander

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OPINION: Last week we learnt that rather than holding steady at 6.8 per cent, New Zealand's unemployment rate had jumped to 7.3 per cent courtesy largely of a 9000-person drop in employment during the September quarter.

Does this result mean that our economy is back in recession?

It certainly shows that the recovery in our economy since the second half of 2009 is still weak and has yet to find its legs - which is exactly the sort of comment one could make for a great number of economies around the world.

The lesson of the past three years has been that recovery from the worst financial crisis since the 1930s is proving to be a drawn-out affair.

As I have been pointing out for some time, a key problem is that we have no economic model which tells us how long it will take for businesses, banks, consumers and governments to become comfortable with their debt levels.

Businesses know this uncertainty exists, and that makes them doubly cautious about investing and taking on extra staff in anticipation of better growth.

In their minds, it is better to spend time one day scrambling to catch up to demand than planning for a growth surge which may not come - and, in fact, has not come (as many have expected on several occasions in the past three years).

But although we can cite deleveraging, bad overseas news, uncertainty and so on as reasons for the bad employment report, we must also note that the Household Labour Force Survey, from which the jobs numbers are derived, has in the past 10 years become very unreliable on a quarterly basis.

For trends it is fine, but, repeatedly, for at least 10 years, it has thrown up rogue quarterly results which we cannot explain by looking at the disaggregated data.

This time, our caution about the accuracy of the numbers is enhanced because no other indicator agrees with the jobs weakness reported.

For instance, the Government's Jobs Online series shows that, in the three months to June, job advertising rose by 2.8 per cent after rising 5.6 per cent during the March quarter. In the September quarter, growth was 0.9 per cent.

The ANZ Business Outlook survey shows that, on average, in the September quarter a net 8 per cent of employers said they were planning to hire more people.

The long-term average reading for this measure is 4 per cent; the June quarter average was 7 per cent and March quarter 9 per cent. The Quarterly Employment Survey shows total weekly paid hours up 1.9 per cent from a year ago whereas the HLFS showed zero jobs growth.

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The labour market in New Zealand is definitely loose, but to say that things are nearly as bad as in the United States, where the unemployment rate is 7.9 per cent, in no way comes close to the reality.

The reality is there may not be as much divergence between the labour market and rising housing market as many people think - which leads me to my long-running warning about housing.

Many people, for many years, have been seizing on any negative piece of information to form a view that New Zealand house prices will soon collapse.

But the simple fundamental is that there is a deficiency of supply, which has become much worse in the past four years and gets worse every day. Even the coming Christchurch construction boom will do nothing to help the shortage in Auckland and, in fact, will aggravate things as builders shift down south for better money.

Therefore it is easy to understand how house prices can keep rising, even though the unemployment rate is high. It is the simple demand and supply interaction, which I have highlighted these past four years and will continue to do so for a great number of years, I fear.

- The Southland Times

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