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Employment confidence on the up

Wednesday 23rd June 2010

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Workers' confidence about their current and future prospects has leapt in the June quarter, reinforcing unemployment statistics that look increasingly likely to be stable or continue to fall over the next two quarters.

The Westpac McDermott Miller Employment Confidence Index increased 4.5 points over the March quarter to stand at 108.2. The telephone household survey indicates the highest level of confidence since the Sept. 2008 quarter when the index was 121.2. An index above 100 indicates there are more optimists than pessimists, while a number below 100 indicates pessimists outnumber optimists. The index's low point was 93.2 in March 2009.

The June quarter has seen a notable improvement in perceptions of current employment conditions. Fewer respondents, a net 48.5% now believe that jobs are hard to get, compared with a net 60% in March and 65.3% in June last year.

"The stunning improvement in employment growth in the first quarter of this year and the resulting sharp decline in unemployment is likely to have had a positive bearing on responses to this question," said Westpac chief economist Bendan O'Donovan. "After all, a 25,000 decline in unemployment (seasonally-adjusted) is unlikely to go unnoticed in a small economy like New Zealand."

The current conditions index rose to 85.2 in the June quarter, up from 77.1 in the March quarter, in what is the steepest quarterly increase in the index since the survey began in 2004. People in jobs are still pessimistic about the current employment situation, but are far less pessimistic than at any time in the past year.

Optimism toward the future is becoming more entrenched with a net 19.3% of respondents expecting job opportunities to be more plentiful this time next year, up from 14.3% in the March quarter.

"While the gap between current and future conditions remains large, developments this quarter show that it is finally beginning to narrow," O'Donovan said. "That is consistent with our view that the labour market is continuing to strengthen, and will provide a key support to economic growth in the coming year."

In the regions, Taranaki/Manawatu/Wanganui experienced twice the employment confidence lift compared to any other area, lifting to 114 from 95.8. The optimism is put down to the current strength in agriculture, particularly dairying, and mining, both of which are prominent and growing industries for the area.

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