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Labour market outlook steady for 2003


Monday 20th January 2003

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New Zealand's labour market is expected to remain strong over the next year, according to a new report from the Department of Labour.

Net migration is expected to continue lifting the population and low interest rates should encourage business growth, the department's six-monthly labour market report said.

However, a fall in export incomes would mean growth would slow to about 3 percent this year, it advised.

During 2002, New Zealand's unemployment levels were pushed to 14-year lows as more people participated in the workforce.

Employment in the September 2002 year was 2.9 percent higher than the year before -- the highest annual growth rate since the mid-1990s -- and domestically-driven economic growth hit 3.8 percent.

Economically the best performing regions were Bay of Plenty, Gisborne, Taranaki, Nelson-Marlborough and Southland.

Wellington and the West Coast had solid growth but it was well below the national average of 3.8 percent.

The best performing labour markets over the year to September were Bay of Plenty (8.6 percent), Taranaki (5.5), Canterbury and Southland.

The places with the lowest labour market growth were Nelson-Marlborough (0.2 percent), and Wellington (1.2 percent).

Unemployment was highest in Northland at 9.1 percent, followed by the Bay of Plenty at 7.6 percent.

High performing areas over the next year are expected to be Auckland, the Bay of Plenty and Taranaki, and along with Canterbury they are expected to enjoy stronger labour markets.

Growth is expected to be low in the Waikato, East Coast and Central regions. Labour markets in Northland, Waikato, East Coast and Central are expected to weaken.

The department said it expected labour market conditions to remain relatively strong over the next 18 months.

Short-term employment indicators pointed to solid job growth, based on the number of ANZ Job Ads which had risen strongly over the past three months to a 16-month high.

Another sign was the National Bank Business Outlook, in which employment intentions had increased to a net 11 percent of respondents planning to hire more staff.

Based on the expected economic slowdown in the year to March 2004, the department forecast job growth to fall to about 1.5 percent.

But it predicted the unemployment rate would remain between 5 and 5.5 percent as job growth roughly matched labour force growth.

That was likely to keep staff shortages at their current high levels and push wages up further.

The department said the biggest risks for New Zealand's economy were a renewed downturn or "double dip" in the US economic and the possible war in Iraq.

The main upside risk was continued growth in the New Zealand economy if business confidence and the world economic recovered.

Sector-wise, further strong production was expected in forestry as plantings matured. Farming incomes would fall because of lower commodity prices, and a higher New Zealand dollar but significant farming investment would keep agriculture growing strongly.

Fishing output would, however, continue to be restricted by lower fishing quotas.

Manufacturing would depend largely on the growth of local and the world economies, while growth in construction was likely to weaken as the immigration-fuelled building boom peaked.

The department predicted that the finance, property, insurance and business service sector would continue to enjoy strong growth from the housing market and general growth, after growing 4.4 percent in the past year.

Growth in accommodation was expected to continue as domestic spending and overseas interest in events like the America's Cup yachting regatta and the Lord of the Rings film trilogy remained solid.

Wholesale and retail trade was expected to continue booming and the communications sector was expected to do well out of continued investment.

Transport would be hit by a weaker primary sector until the world economy recovered but tourism growth would lead to expansion.

Health, education, community and personal services, another growth area in recent times, was expected to remain strong due to high population growth.

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