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Analysis: What's behind the jobs growth and unemployment fall

By Simon Louisson of NZPA

Friday 11th February 2005

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Today's Household Labour Force Survey put New Zealand top of the world ladder on unemployment.

The fall in the jobless rate to 3.6% in the December quarter from 3.8% in the September quarter is the best number since Statistics New Zealand began its series in 1986.

According to New Zealand Institute of Economic Research data, its the lowest unemployment rate since September 1985 when the ravages of the Rogernomics reforms began to hit the labour market.

Behind today's stunning figures was a massive 33,000 rise in net new jobs in the quarter. That equated to a 1.6% rise in the numbers employed - way beyond economists' average estimates of 0.5%, and the highest quarterly growth rate on record.

There are now 2.056 million people with jobs, up 87,000 on a year ago.

Meeting demand for workers, the workforce rose significantly in the quarter - up by 30,000. This was partly fed by a 12,700 increase in the working-age population while those categorised as "not in the labour force" fell by 20,000.

The workforce participation rate - identified by the Government as a key statistic to help lift living standards - rose to a record 67.7% from 67.0% in the September quarter.

SNZ said the sizeable labour force growth, relative to the increase in the working-age population, resulted in a strong increase in the high participation rate.

There were a number of groups which saw their participation rate rise strongly including women and young people.

The participation rate for the 15-19 year group from to 56.0% from 50.7% and the 20-24 year group rose to 76.4% from 70.5%.

The rate for women rose to 60.8% from 69.9% against the male rate of 75.1%, from 74.5%.

There have been nine successive quarters of jobs growth. However, unlike in recent quarters, most of the new jobs in December came in part-time work with 14,000 of those going to women and 8,000 to men.

Westpac economist Donna Purdue said that over the last year there had been a massive increase in demand for workers but during this quarter the supply of labour almost matched demand. Thus, the number of those unemployed only fell by 3000 to 76,000.

"We've had a lot of people outside the labour force being drawn in and that has seen the participation rate rise to a record high," she said.

It appears as if a good part of a workforce expansion can be attributed to students moving out of formal study and into work. It was unclear whether that was a seasonal phenomenon and temporary, Ms Purdue said. The March quarter could see large numbers move back into "not in the labour force" category.

Also, because many of the new jobs were part-time and in the service sector, they could disappear as quickly as they were created.

The figures for Maori made interesting reading, possibly reflecting the youthfulness of the Maori population. The unemployment rate went against the trend, rising to 8.9% from 8.3% (against the Pakeha rate dropping to 2.3% from 2.6%.)

However, encouragingly, the participation rate rose sharply to 67.1% from 63.7%. Those employed rose by 10,000 in the quarter to 188,000, while those not in the workforce fell by 9700 to 101,100. However, the number unemployed rose to 18,300 from 16,100.

The total number of those unemployed for over six months continues to fall dramatically - to 14,400 from 21,600 in December 2003.

ANZ-National Bank economist Cameron Bagrie said today's "boomer" numbers indicated demand for labour was being met by supply.

There was still uncertainty about whether labour market tightness would spill into higher wages. He doubts the Reserve Bank will raise interest rates again at its next review on March 10 but he thinks it may move in April if there a "strong" rise in the March quarter Consumer Price Index.

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