I was surprised to see the official unemployment figures issued today – down from 4.2% to 4.0%. However this reflects those workers that were laid off but unable to seek further employment due to the Level 4 lockdown but still included in the labour force. Remember the unemployment calculation is those people who are unemployed and actively seeking employment.
According to the ASB a better measure in the current environment would be underutilisation – It is defined such that jobseekers outside the labour force are captured (unlike the unemployment rate) and includes people working part-time who would like to work more hours. Utilisation rose from 10.4% to 12%. The unadjusted LCI, more of a ‘raw’ measure of wage costs, rose just 0.4% qoq, with annual growth slowing from 3.8% to 3.1%. Average hourly earnings from the QES slowed to 2.5% yoy for private sector workers, a multi-year low.
End of wage subsidy
Although these were positive signs for unemployment figures later in the year it is inevitable that these figures will deteriorate when the wage subsidy ends and we return to an economy which isn’t propped up by government spending. Unemployment is forecast to peak at 9.8% in September.
Source: ASB Bank – Economic Note – 5-8-20