Quarterly Labour Market Report - Ministry of Business ... LABOUR MARKET REPORT (AUGUST 2015)...

Quarterly Labour Market Report

August 2015

MB13376_1839 Aug 2015

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Ministry of Business, Innovation and Employment (MBIE) Hikina Whakatutuki - Lifting to make successfulMBIE develops and delivers policy, services, advice and regulation to support economic growth and the prosperity and wellbeing of New Zealanders.

MBIE combines the former Ministries of Economic Development, Science + Innovation, and the Departments of Labour, and Building and Housing.

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This document is a guide only. It should not be used as a substitute for legislation or legal advice. The Ministry of Business, Innovation and Employment is not responsible for the results of any actions taken on the basis of information in this document, or for any errors or omissions.

ISSN 2253-5721

August 2015

©Crown Copyright 2015

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Contents SUMMARY ................................................................................................................................. 4

ECONOMIC CONDITIONS ........................................................................................................... 5

Domestic conditions .............................................................................................................. 5

Exports ................................................................................................................................... 5

Economic outlook .................................................................................................................. 6

LABOUR DEMAND ..................................................................................................................... 7

Overall employment growth ................................................................................................. 7

Employment growth by full-time/part-time status .............................................................. 7

Employment growth by sex ................................................................................................... 8

Employment growth by industry ........................................................................................... 9

Employment growth by region ............................................................................................. 9

LABOUR SUPPLY ...................................................................................................................... 11

Migration ............................................................................................................................. 11

LABOUR MARKET MATCHING ................................................................................................. 13

Unemployment by region ................................................................................................... 13

Jobseeker support ............................................................................................................... 14

Job vacancies ....................................................................................................................... 15

Wage growth ....................................................................................................................... 16

SPECIAL FEATURE: SOUTH AUCKLAND LABOUR MARKETS ..................................................... 17

Summary ............................................................................................................................. 17

Population ........................................................................................................................... 17

Employment and Unemployment ....................................................................................... 19

MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT 3

QUARTERLY LABOUR MARKET REPORT (AUGUST 2015)

SUMMARY The overall state of the labour market remains robust, although momentum is slowing in the face of economic headwinds. Employment increased by 7,000 (0.3 per cent) over the quarter, and is up by 69,000 (3.0 per cent) over the year to June. The Canterbury rebuild is reducing in importance as a driver of overall employment growth.

The working-age population saw its largest quarterly increase since the series began in 1986, as net migration continues to break records. The labour force participation rate has slipped slightly from last quarter, but is still at historically elevated levels.

The continued labour force growth is ensuring labour demand can be met, but is placing upwards pressure on the unemployment rate, which increased to 5.9 per cent over the quarter. Wage growth remains subdued, but comes against the backdrop of low inflation. Wage inflation has been higher or equal to the CPI for over three and a half years.

Figure 1- Key labour market indicators (seasonally adjusted)

Indicator June 2015 Quarterly change Annual change Employed 3,618,000 + 7,000 (0.3%) + 69,000 (3.0%) Unemployed 148,000 + 3,000 (1.9%) + 10,000 (7.5%) Participation rate (%) 69.3 -0.2 pp. +0.6 pp. Employment rate (%) 65.2 -0.3 pp. + 0.4 pp. Unemployment rate (%)

5.9 +0.1 pp. +0.2 pp.

SOURCE: Statistics New Zealand

MBIE forecasts employment growth to remain strong but for growth rates to decline over the next three years.

Figure 2- Short-term labour market forecasts (year ending March, or March quarter)

Indicator Actual Forecast 2015 2016 2017 2018 Employment growth (AAPC)

3.4% 2.3% 1.8% 1.2%

Participation rate (%) 69.5 69.3 69.5 69.7

Employment rate (%) 65.4 65.6 65.9 66.0

Unemployment rate (%)

5.8 5.3 5.2 5.3

SOURCE: Ministry of Business, Innovation and Employment



ECONOMIC CONDITIONS Indicators point to slowing momentum in New Zealand’s economic growth, with falling commodity prices and a downward trend in business confidence. Some of the factors underpinning recent strong growth (migration, construction activity, labour income growth) remain in play, and Treasury expects growth to be around trend in 2015.

Figure 1- Annual and quarterly production GDP growth


Domestic conditions GDP grew 0.2 per cent in the March 2015 quarter, down from 0.7 per cent in December. The slower growth is largely due to declines in the primary sector, with drought conditions and lower dairy prices leading to reduced milk production and lower gas and oil prices leading to decreased mining activity. Forestry production also dropped over the quarter.

Growth in the services industry provided an offset to the primary sector decline. Retail trade and accommodation saw its largest annual growth in a decade, at 6.1 per cent, with increasing levels of tourism (and major events such as the Cricket World Cup) seen as drivers. The accommodation industry saw its largest annual growth (8.0 per cent) since September 1995. Increased tourism was also reflected in growth in arts and recreation services and international air travel.

Exports Merchandise exports rose 0.4 per cent in the June quarter, largely due to increased fruit exports. Fruit exports totalled $552 million, up 13 per cent from March, and the highest value ever for a quarter. Exports of logs and wood and crude oil were also up, and provided an offset for falling meat and milk exports.



Economic outlook Indicators of business confidence have fallen sharply over the last few months, with the ANZ Business Outlook recording negative confidence for the first time since the February 2011 Canterbury earthquake. Prior to that, the last time business confidence was negative was in 2009, when the economy was in recession. Business sentiment is negative across all sectors, with agriculture the most pessimistic, and services the least.

Figure 2- Indicators of business confidence

SOURCE: ANZ Business Outlook (ANZBO), NZIER Quarterly Survey of Business Opinion (QSBO). Business confidence is defined as the percentage of businesses expecting general business conditions to improve minus the percentage expecting them to decrease.



LABOUR DEMAND Employment growth has slowed over the past two quarters, but remains strong over the year. Drivers of employment growth are shifting, with the Canterbury construction industry playing a less prominent role.

Figure 3- Annual and quarterly employment growth


Overall employment growth Employment increased by 7,000 (0.3 per cent) over the June quarter, and 69,000 (3.0 per cent) over the year to June. This is the eleventh consecutive quarter of employment growth, marking the second-longest growth period since that between December 1992 and September 1996.

Employment growth by full-time/part-time status Full-time employment has been the main driver of recent employment growth. In the June quarter, full-time employment grew by 8,100 (0.4 per cent), the eleventh consecutive quarter of growth. Over the year, full-time employment is up by 51,800 (2.9 per cent). Part-time employment rose very slightly over the quarter, and is up by 17,300 (3.4 per cent) over the year.

Part-time employment growth was stronger than full-time employment growth at the end of the last business cycle (around 2007), but growth for both types of employment stalled during the recession. Since 2012, full-time employment growth has been strong, while part-time employment growth has been volatile.



Figure 4- Full-time and part-time employment indices


Employment growth by sex Growth in employment over the quarter came mostly from an increase in male employment, which rose by 7,000 (0.6 per cent) through strong growth in full-time employment. Female employment remained largely static, as a 6,000 increase in part-time employment was offset by a 5,000 fall in full-time employment.

Male employment growth fell relative to female employment during the recession, although the growth gap has narrowed since 2013.

Figure 5- Female and male employment indices




Employment growth by industry Over a third of annual growth in employment came from the manufacturing industry (up 24,500, or 10.1 per cent). This is the first time since December 2010 that manufacturing led employment growth, and the rise has been broad-based: food production, machinery and equipment manufacturing, and textile manufacturing underpinned the increase. The annual increase in manufacturing employment was centred in Canterbury (up 6,800) and Auckland (up 6,200).

Growth in construction employment has slowed since the previous quarter, and is up by 22,700 (11.4 per cent) over the year. Most annual construction growth was in Auckland (up 8,600), followed by Canterbury (up 5,200).

Figure 6- Cumulative employment growth since June 2005


Employment growth by region Nearly half (44 per cent) of annual employment growth was in Auckland, with an increase of 29,600 (3.9 per cent) over the year. This was followed by Bay of Plenty (11,000, or 8.3 per cent) and Waikato (up 9,000 or 4.3 per cent). Canterbury's employment growth continues to slow, with an increase of just 3,300 (1.0 per cent) in the year to June.

Employment rates picked up in most regions in the year to June. The strongest increase was recorded in Bay of Plenty which rose 4.0 percentage points to 64.6 per cent, the highest employment rate on record for the region.



Figure 7- Employment rates by region




LABOUR SUPPLY

In the June quarter, New Zealand's working-age population increased by 24,000 (0.7 per cent), the largest quarterly increase since the series began in 1986. This increase was mostly driven by an increase in those not in the labour force (up 15,000). The labour force grew by 9,000 over the quarter, consisting of a 7,000 increase in employment, and a 3,000 increase in unemployment.

Migration In the year ending June 2015, New Zealand had a net gain of 58,300 migrants, the biggest annual gain on record. The annual gain in migrants has been setting new records for 11 consecutive months.

Net migration was driven by increasing arrivals and decreasing departures. Migrant arrivals totalled 115,700 in the year ending June, up 15 per cent from the previous year. Migrant departures numbered 57,400, down 8 per cent.

Three trends are underpinning the growth in arrivals. Firstly, since 2011, work visas have returned to a pre-recession trajectory, a trend supported by workers arriving for the Canterbury rebuild.

Secondly, from 2012 onwards, the number of New Zealand citizens returning from abroad has been increasing. 29,700 New Zealanders migrated to New Zealand in the year ending June, up from 28,000 in 2014, and 24,700 in 2013.

Finally, in the last two years, there has been a sharp uptick in the number of student visas, primarily for Indian students.

Alongside the increasing arrivals, departures of New Zealanders has been dropping since mid-2012. 35,300 New Zealand citizens left in the year ending June 2015, a substantial drop from the 62,100 who left in the year ending June 2012.

Figure 8- Annual migration to/from New Zealand




Figure 9- Annual migration to/from New Zealand




LABOUR MARKET MATCHING In the June quarter, the number of unemployed people increased by 3,000 (1.9 per cent) consisting of a 2,000 fall in unemployed men, and a 4,000 increase in unemployed women. Overall, the unemployment rate ticked up 0.1 percentage points to 5.9 per cent. Over the year, unemployment increased by 10,000, lifting the unemployment rate by 0.2 percentage points to 5.9 per cent.

Unemployment by region Over the year, unemployment rates increased in most regions, with the biggest increases being recorded in Southland (up 2.3 percentage points to 5.5 per cent), and Taranaki (up 2.1 percentage points to 7.3 per cent).

The gap between North Island and South Island unemployment rates remains wide (at 6.3 per cent and 3.9 per cent respectively), but has narrowed over the year.

Figure 10- Unemployment rates by region




Jobseeker support In July 2013, Work and Income New Zealand introduced Jobseeker Support for people who are preparing for, and looking for, full-time work. Jobseeker Support incorporates the unemployment benefit, sickness benefit, domestic purposes benefit with children 14 and older, widows benefit with children 14 and older, and domestic purposes women alone benefit.

The number of Job seeker Support clients fell by 3,059 (or 2.5 per cent) over the year ending June 2015. Decreases were recorded across all age groups, except 25-39 year olds, and across all ethnic groups except Māori. The proportion of the working-age population receiving Jobseeker Support benefits fell from 4.5 to 4.3 per cent.

Since 2011, there has been a divergence between the number of people officially unemployed (the HLFS measure) and the number of Jobseeker Support beneficiaries. Persons ineligible for Jobseeker Support (but classified as unemployed) include:

• Unemployed 15-17 year olds • Unemployed people aged 65 years or older • Unemployed people looking for part-time work (such as students) • Unemployed people with sufficient family or personal income to support them while

looking for work • Unemployed people already on another benefit

Figure 11- Jobseeker Support beneficiaries and unemployment

SOURCE: Statistics New Zealand, Ministry of Social Development



Job vacancies MBIE’s Jobs Online skilled vacancies index measures the change in job vacancies advertised on three internet job boards- SEEK, TradeMe jobs, and the Education Gazette.

The overall trend for online skilled job vacancies has been falling in recent months. Over the year to June 2015, skilled vacancies increased by 3.8 per cent, with increased vacancies being recorded in every industry except information technology (down 9.7 per cent) and construction and engineering (down 0.1 per cent). The biggest increase was in education and training vacancies (up 27.2 per cent).

At a regional level, vacancies were up over the year in the upper North Island and Canterbury. The biggest increases were in Bay of Plenty (up 14.8 per cent) and Gisborne/Hawke’s Bay (up 10.2 per cent).

Figure 12- Jobs online skilled vacancies index

SOURCE: Ministry of Business, Innovation and Employment



Wage growth The Labour Cost Index (LCI) and Quarterly Employment Survey (QES) provide complementary measures of wage growth. The LCI measures wage inflation and reflects changes in the rates paid by employers to have the same job done to the same standard.

The QES measures the average gross earnings paid to employees in economically significant businesses. Changes in the QES may result from changes to New Zealand’s industrial composition (e.g. if a lower-paying industry increased its total paid hours relative to other industries, it would lower the QES earning measure). Shifts in the QES may also reflect changes within industries, such as the skill levels or performance of employees.

Wage growth remains subdued in the June quarter, but this comes against a backdrop of low inflation. LCI wage inflation (salary and wage rates including overtime) increased by 1.6 per cent over the year, while QES average ordinary-time hourly earnings rose 2.8 per cent. This compares to annual CPI growth of 0.3 per cent. Wage inflation has been higher or equal to the CPI since September 2011.

Figure 13- Annual wage growth




SPECIAL FEATURE: SOUTH AUCKLAND LABOUR MARKETS This section looks at South Auckland1 and highlights key demographic differences between the area, the rest of Auckland, and New Zealand, using sub-regional data from the Household Labour Force Survey (HLFS) and the 2013 Census.

A five year average of HLFS data is used to smooth out volatility in series.

Summary South Auckland’s population differs greatly to the rest of Auckland. It has a uniquely high proportion of Pasifika and low proportion of Europeans living there. The population is also younger in age and lower-qualified.

Employment rates of residents in South Auckland tend to be lower than average, especially for those who are lower-qualified. Unemployment rates are significantly higher in South Auckland, with the lower-qualified population at almost double the rate seen in the rest of Auckland. NEET rates are also higher for South Auckland, especially a concern given the high proportion of youth in the area.

Māori have poorer labour market outcomes than other ethnic groups in South Auckland. Employment rates are significantly lower, and unemployment and NEET rates are significantly higher, when compared to Māori in other parts of Auckland.

Population South Auckland has a very diverse population that has significant demographic differences from the rest of Auckland and New Zealand as a whole. Around a third of the population of South Auckland are Pasifika. Māori also make up a higher-than-average proportion of the population.

1 South Auckland is defined by four Auckland local boards - Mangere-Otāhuhu, Ōtara-Papatoetoe, Manurewa and Papakura. This definition is used by the Auckland Council.



Figure 14: Total response ethnicity distribution, five year average to March 2015, Household Labour Force Survey

South Auckland also has a higher proportion of young people, and a lower proportion of older people.

Figure 15: Age group distribution, five year average to March 2015, Household Labour Force Survey

Māori



Almost three-quarters of the population have NCEA level 3 qualification or below, compared with just under 60 per cent in the rest of Auckland. The proportion of higher qualified (level 7+) people is much smaller in South Auckland than found in the rest of Auckland and is lower than the rest of New Zealand as well.

Figure 16: Qualification distribution, five year average to March 2015, Household Labour Force Survey

Employment and Unemployment Unemployment rates for South Aucklanders are significantly higher than the rest of Auckland and New Zealand, and the gap is worse for lower-qualified South Aucklanders. South Aucklanders with a level 7 or higher qualification have similar unemployment rates to the rest of Auckland. Overall, South Auckland unemployment rates are around double rest-of-Auckland and national averages.



Figure 17: Unemployment rates by qualification level, five year average to March 2015, Household Labour Force Survey

Lower-qualified residents of South Auckland have lower employment rates than other parts of the country.

Figure 18: Employment rates by qualification level, five year average to March 2015, Household Labour Force Survey



Rates of young people not in employment, education and training (NEET) show that a high proportion of South Auckland youth are disconnected from the workforce. Please note that the sample was too small to show the NEET rate for South Aucklanders with level 7+ qualifications.

Figure 19: NEET rates by qualification level, five year average to March 2015, Household Labour Force Survey

Māori residents in South Auckland have the highest rate of young people in NEET (Not in employment, education or training). Māori from the ages of 15-24, in particular Māori males, are significantly more likely to be NEET in South Auckland than youth in other ethnic groups with the same individual characteristics.

Of the main ethnic groups, Māori residents in South Auckland have the widest gap in outcomes from their counterparts in the rest of Auckland. As a broad ethnic group, they also experience the poorest outcomes in terms of employment of any group across the Auckland region. The experience of low employment affects Māori males in particular.

Compared with the rest of Auckland, a higher proportion of South Auckland workers are employed in manufacturing (18 per cent compared with 10 per cent) and transport, postal and warehousing (11 per cent compared to 4 per cent); and a lower proportion of South Auckland workers are employed in professional, technical and scientific services (3 per cent compared with 11 per cent).

Looking at the skill levels within the manufacturing sector, South Auckland workers tend to be employed in lower-skilled jobs, compared with the rest of Auckland where the manufacturing workers are much higher skilled.



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