Jobless rate may be at seven-year high

Monday 3rd August 2009

(BusinessWire) – New Zealand’s unemployment rate probably rose to a seven-year high in the second-quarter, as companies and government departments shed jobs to cut costs in the worst economic slump for 30 years.

The jobless rate rose to 5.6% in three months ended June 30, from 5% in the previous three months, according to the consensus of economists’ estimates. The participation rate was probably little changed at 68.3%. The data is scheduled for release on August 6.

The New Zealand economy may lose 60,000 jobs in the year ending March 31, 2010, according to the New Zealand Institute of Economic Research, which is forecasting unemployment will top 7% next year and remain high through 2011. Among companies to eliminate jobs in the past month, Cedenco Foods announced 125 positions would be cut, while NZ Post chopped 384. The Inland Revenue Department announced 250 job cuts in April.

“Just as other data have been showing promising signs of recovery, we expect the unemployment rate to get seriously ugly,” said Brendan O’Donovan, chief economist at Westpac Banking Corp.

He said unemployment is typically a lagging indicator and that’s be exacerbated in New Zealand, where there had been a shortage of workers heading into the recession. Since the economy began shrinking, companies have reported greater ease in finding workers, while the number of registered unemployed has grown.

Last month, Prime Minister John Key said he expects job losses to continue into 2010 even as the economy will probably emerge from recession in the final quarter of this year. A long tail of unemployment “is the consequence of a very long recession," he told the Parliament. Key yesterday announced a $152 million package to create new work, education and training opportunities for people under the age of 25.

ANZ National bank expects unemployment to hit 7.5% next year as the labour market continues to deteriorate.

The number of people collecting unemployment benefits has almost tripled to 55,855 in June from, the same month of 2008.

On Tuesday, Statistics New Zealand releases the Labour Cost Index and the Quarterly Employment Survey. The LCI probably fell to 2.8% from 3%, showing wage inflation slowed last quarter as a rising jobless rate eased pressure on employers to offer higher wages.

Businesswire.co.nz

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