This headline was the assessment we made of the situation in May-June 2008 and that is exactly what was happening. The Household Labour Force Survey figures for the June Quarter 2008 registered an increase by 15,000 in the number employed compared with June 2007. 

This contrasts with a measured decline by 5,000 in the year to March 2008 and an increase by 54,000 in the year to December 2007. As we suspected there seems to have been some survey effect there and, with this in mind, we had forecast that employment would bounce back positive, as it has done. In fact, if you average the last three figures, they come to an increase by 20,000 which is a fairly steady performance.

Some interesting things in the detail for the last quarter or two. The major shake-up in the finance sector has affected construction (and vice-versa probably) and so employment in construction has declined, as it has in logging. 

Another measured fall has taken place in Government administration – which has reduced by 13,000 on a year ago. Is this a rather unusual case of the Labour Government following National’s policies? Perhaps partly another survey effect.

A really disturbing sign is that, although the Reserve Bank is achieving its desired reduced demand in the economy through the higher interest rates and the financial squeeze, it is also reducing capacity to supply, especially in construction.

Given the strong commitment of Labour and National to construction of infrastructure and perhaps even to overall investment, this reduced capacity is likely to drive some price rises in future. No doubt at the time the Reserve Bank will interpret these as inflation. 

The reduced capacity shows through in reduced employment of tradespeople in building (down 10,000); electricians and similar (down 5,000); and metal trades (down 11,000), a reduction in tradespeople employed by 26,000 people.

Just the sort of squeeze on the economy that reduces our future capacity and capability.