The employment track has been steady for over a year, with employment increases of about 35,000 to 40,000 people or 1.5% to 2% per annum.

We expect some fluctuation in the numbers as a result of the short-term Rugby World Cup 2011, but thereafter the main underlying drivers are slack. Household formation remains low, held back by the uncertain environment for borrowing, and being exacerbated by the migration switch to a net outflow of people. The actual outflow was only 103 people in the year ending October 2011, but if the present track continues, the net outflow will be 5,300 by March 2012 and 9,500 by June 2012.

The main weakness was in the building and construction industry. In the September quarter however the weakness has emerged in the two main drivers of the economy, the export or tradable sector and the consumer-driven sector. The previous growth has fallen out of the export primary and processing industries, and their total was a small reduction in the year to September 2011. The consumer-driven retail and hospitality industries declined by about 3% in the year to September.

The overall employment increase was 24,500 or just over 1% in the year. Surprisingly, given the fiscal budget stringency, the Household Labour Force Survey recorded an increase of over 20,000 people in employment in health, social services, education and training sectror, as well as small increases in employment in Public Administration and Safety. The private sector business services of all types increased also by about 12,000 people.

Construction is the economy’s one hope left. Household formation will not drive residential building construction, but there is still the hope that the Christchurch re-build will get underway after mid 2012. Consequently we are forecasting a slack labour market for most of the first half of 2012. Thereafter there could be some support to the inward migration flow bolstered by Irish tradespeople recruited for Christchurch, to replace the tradespeople emigrating at present.

We are forecasting a fairly lacklustre range of employment increases for the next four years, in the range 1.2% to 1.6% per annum. The small amount of employment growth, balanced with some labour force reductions due to net outward migration, and some people losing hope of finding work and leaving the labour force will see the unemployment ease back from the 151,000 in September quarter 2011 to about 100,000 in 2015.

This reduction in unemployment is NOT a sign of strength in the economy. There will not be jobs for all the people who want them. Many of those will have by then voted with their feet: either out of the labour force, or out of the country.

Migration

Net emigration has reached a strong momentum, and we now do not expect it to become positive again until 2014-15. The Gross outflow to Australia in the year to October 2011 was 51,000, and the net outflow there was 33,000. The present momentum in the net migration outflow indicates that it could reach as high as 15,000 per year by mid 2013. If it does, this would be the highest net outflow since the re-structuring of the economy drove the heavy emigration from 1985 to 1990.