Economic and Labour Market Update - Novemeber 2009

Two significant sets of indicators providing a snapshot of the impact of the recession on the region’s businesses were released: Business Demography Statistics for February 2009, and the Household Labour Force Survey for the September 2009 quarter.

This month saw Auckland hosting a number of public seminars and lectures on the economy, creating new dialogue and critical thinking about our economic fundamentals.

Although there was relatively little overall change in the number of business units, there was significant change to some industries. For example, in the category of ‘property operators and real estate services’, there was a massive increase in residential property operators¹, (up 1,111 units, or 13%), while real estate services declined by 16% (761 enterprises) and non-residential property operators declined by 394 enterprises (down 2%).

Overall, the construction industry was down 490 business units, or 2.8%, with non-residential property operators showing the biggest decline (down 394 business units) followed by house construction (4% or 193 business units), and other construction  sector categories showing marginal increases.

Other increases of note were in the financial and insurance services sector (up 490 or 3.9%), and the professional, scientific and technical services (up 425 or 1.9%).

At February 2009, there were an estimated 621,400 employees in the region, down 3.6% from February 2008. The industries with the largest decreases in employee numbers were administrative and support services (down 5,200 or 13.5%), manufacturing (down 5,100 or 6.3%) and retail trade (down 4,800 or 7.3%).

Table 1. Selected Auckland industries with most signficant changes between 2008 and 2009

- A drop in the number employed
- The unemployment rate (annual average) increasing to 6.2% (compared with 5.5% nationally)
- Particularly high (and increasing) unemployment rates among Maori, Pacific peoples, and youth
- A slight decrease in the overall proportion of those employed who work full time  
- Increases in numbers employed in education, health and community services.

Table 2 shows the key headline figures for Auckland’s labour force status, at September 2009. There was a drop of 19,800 people employed in the region for the year ended September 2009, wtih 13,300 more people unemployed than at September 2008 (an increase from 4.3% to 6.2%).

Table 2. Labour force status for September 2008 and 2009 (annual averages)

The unemployment rates by age group shows stark differences by cohort. While youth unemployment is traditionally higher than older age groups, the rate of unemployment for under 25s is rising at a greater rate than for other age cohorts (Figure 1).

Figure 1. Auckland’s unemployment rate by age

Table 3 shows the unemployment rates among ethnic groups, with the highest rate, (and greatest annual rise) in unemployment amongst Pacific peoples (12.5%), followed closely by Mäori (11.6%). Europeans had the lowest unemployment rate (4.5%) of the ethnic groupings.

Table 3. Unemployment rates amongst various groups

 There was little change in the relative rates of unemployment by gender, with a 6.4% rate for women, and 6.1% rate for men.

 Commentators point out that changes in the labour market tend to lag behind changes in the economy – what the statistics tell us now reflects what the economy was doing a few months or quarters ago. Economic changes are slower to affect the labour markets as when spending in the economy weakens, businesses do not make people redundant straight away.

Given that it costs a lot to find new staff and train them up, and that the most recent experience of employers was one of great difficulty in finding staff during a sustained period of low unemployment,  Alexander³ comments that ‘the bulk of 2008 was characterised by businesses hoarding people waiting for the late-2008 upturn’. He also comments that the rising unemployment rate suggests wage rise restraint, and speculates that the NZ Reserve Bank is unlikely to raise the cash rate soon.