- The unemployment rate hit a painful 5.6% in the June
quarter. The underutilisation rate grew to 13.8%, the
highest in over 12 years. But some good news is that the
labour force grew over the quarter. The participation rate
was up to 70.7%. Employment tracked sideways, staying at
66.7%. - There’s more slack in the labour market now
than at the start of the year. Largely driven by low
business confidence, uncertainty, and lacklustre consumer
demand. Wages therefore are going backwards in real terms,
growing only 2% compared to prices which are up
4.1%. - Operating costs are going up while demand is
weak. But the economy is split into two halves: the South
Island and the North Island. With unemployment 3.7% in the
South and 6% in the North.
Ouch! The
unemployment rate climbed to 5.6% in the June quarter. We
were expecting the Kiwi unemployment rate to peak at 5.6%
later in the year, but it came earlier than expected. This
down-side surprise hurts. The March quarter unemployment
rate was also revised up, to 5.4% from the previous estimate
of 5.3%.
While the unemployment rate rising is
worrying, we are more concerned with the underutilisation
rate. This increased to 13.8%, from 12.9% in March. The
highest it’s been in over 12 years (since December 2013).
The rate is accelerating faster for women than for
men.
The news is mixed however. The labour force grew
by 0.7% over the quarter. If the size of the labour force
hadn’t changed the unemployment rate would still be 5.6%.
That’s worrying. But the participation rate increased to
70.7% from 70.4%. Another silver lining is the employment
rate remaining steady, at 66.7%. With a quarterly growth
rate of 0.5%, the number of employed Kiwi grew in proportion
to the size of the labour force.
Advertisement – scroll to continue reading
Input costs for
businesses have increased considerably (due to sky-high oil
prices) over the first half of this year. The Reserve Bank
has commenced an interest rate hiking cycle that will
increase the cost of borrowing and slow down the economy.
The true effects of the economic downturn due to the Middle
East conflict may not have fully materialised in the data
yet. With considerable slack left in the labour market, the
Kiwi economy is not in for an easy recovery.
On the
earnings front, the picture is fairly bleak. After two
consecutive quarters of inflation running above the Reserve
Bank’s target band of 1-3%, households have felt the bite of
the cost-of-living crisis strengthen. Wage growth is
unchanged from the March quarter, unlike inflation which
rose sharply. Prices rose twice as fast (4.1% annually) in
the June quarter, compared with wages (up 2%). Wages are up
slightly more in the private sector (2.0% annually) compared
with the public sector
(1.7%).
Â