The actual state of the labour market and the economy has been obscured by many commentators’ obsession with the U-word – unemployment.
When the Household Labour Force Survey (HLFS) for the March 2009 quarter was published, many commentators trumpeted the increase in unemployment to 5 percent of the labour force. Some went so far as to opine that it was not as high as expected, and almost implied regret that unemployment is now unlikely to reach 10 percent next year.

That reporting prompts another U-word – unprofessional. A quick look at the neighbouring column of data on the HLFS which is employment – surely the main measure of the health of the labour market and the economy – would have provided a more informative assessment. Total employment in March 2009 was 2,173,500, which was 16,600 more than in March 2008. Now, 16,600 is not quite as many as the increase in people available for work, thus the number unemployed increased. However, these figures do not indicate a rapid drop into a black hole. Annual employment increases have been steadily declining since the increase by 38,000 two-and-a-half years ago, and over the last year have averaged 19,400. The 16,600 is just slightly less.

A little more investigation would have revealed two more startlingly informative snippets. The first is that most regions experienced an increase in employment in the last year. Auckland was the striking exception. Clearly, this is further evidence of the existence of two economies: boom-bust Auckland and steady-as-she-goes rest. In particular, the number employed in Auckland fell by more than 30,000 people over the year to March. This means that outside of Auckland the number of people employed increased by over 47,000 over this same period. And that is a large number relative to New Zealand’s labour force. It is way above the natural increase plus net inward migration. Look for some more internal migration out of the Super City!

Another snippet is that in the finer detail the job losses are mainly contained in some manufacturing previously damaged by the monetary fluctuations (wood-based, machinery etc) and the finance sector that caused it. There is already growth in food processing and manufacturing; in construction and even in the trades. There is strong growth in business services, presumably to prevent damage from the international ‘flu, and preparing for a recovery. There is also growth in employment in education, which is hopefully being targeted at upgrading skills for an early recovery.

Some of the other social and personal services are also growing to carry communities and consumers along with the turbulent times.
What about employment in government administration? Here, the answer is zero-point-zero change. The March HLFS must have been before the effects of the activities of the mini Razor Gang. We hope it stays a Razor and doesn’t become a Hatchet. Otherwise the Government could undo the good work of the rest of the economy and generate a deeper recession. Such a ruthless approach, were it to eventuate, would indeed be repeating the mistakes of the early 1990s.

 - This article was reprinted from BERL Monthly Monitor, May 2009.