In the September quarter New Zealand’s unemployment rate was 4.2% which was up 0.3% from the June quarter. Since the global financial crisis unemployment figures have been trending downwards since it peak of 6.7% in the September 2012. Despite the quarterly rise in unemployment, the underutilisation rate, which is a broader measure of spare capacity in the labour market, has fallen to the lowest level in over eleven years. The fall in underutilisation this quarter was driven by a drop in the number of underemployed people, those who work part time but are looking to work more hours.
During 2019 the labour market appears to have tightened but it does appear to lag behind the growth cycle meaning that with the slowdown in growth in 2019 higher levels of unemployment will be apparent early this year. It is interesting to note that as labour becomes more scarce with lower levels of unemployment wage growth usually follows – see graph.
Annual wage growth is at its highest level since the 2008 global financial crisis, after which wage growth remained largely flat. The percentage of wages that increased is at its highest level since March 2015, at 59%. This shows there has been more broad-based wage growth across the Labour Cost Index* (LCI). Salary and wage rates for the public sector increased 3.0 percent annually, the highest rate since June 2009. This compares to a 2.2 percent increase in the year to the June 2019 quarter. Public sector wage rates have been driven by collective agreements for teachers, nurses, and police over the past year. With these three largest occupations excluded, public sector wages would have increased 1.8 percent annually.
*The labour cost index (LCI) measures changes in labour costs. These costs consist of base salary and ordinary-time wage rates, overtime wage rates, and non-wage labour-related costs. The index essentially covers all employees aged 15 years and over, in all occupations, and in all industries except domestic services.
Department of Statistics NZ
Westpac Quarterly Overview – November 2019