Jobless rate climbs to nine-year high

Thursday 6th August 2009

New Zealand’s jobless rate rose more than expected to a nine-year high, suggesting the worst recession in 30 years takes is taking a greater toll on the labour market.

The kiwi dollar slid against the Australian dollar as the jobless rate exceeded the central bank’s forecast. The unemployment rate rose to 6% in the three months ended June 30, according to Statistics New Zealand, the highest level since June 2000.

The participation in the labour force was little changed at 68.4%. The kiwi fell to 79.80 Australian cents from 79.99 cents immediately before the announcement. Against the greenback it slipped to 67.14 US cents from 67.29 cents.

As many as 60,000 jobs may be lost by the end of March next year according to the New Zealand Institute of Economic Research, which predicts unemployment will hit 7% in 2010 and remain high through 2011.

Among companies to cut staff in the past month, Cedenco Foods announced 125 positions would be lost, while NZ Post axed 383. The Inland Revenue Department announced 250 job cuts in April.

“There are more people hunting for jobs, and the modest decline in number of people employed saw the unemployment rate jump sharply,” said Jane Turner, economist at ASB in a report. Still, “the pain of falling labour demand is in part being borne by wage freezes or reduced work hours rather than outright layoffs.”

Economists were predicting the jobless rate would rise to 5.6%, according to a Reuters survey, as signs pointed to a pick-up in New Zealand’s economy. Still, the Reserve Bank was more pessimistic, forecasting unemployment to reach 5.9% and expects the jobless rate to peak at 7.1% next year.

“Job losses will be the major issue for the economy through 2009,” said Bernard Doyle, New Zealand strategist at Goldman Sachs JBWere. “Today's jump in the unemployment rate is a timely reminder that New Zealand was still in recession in Q2 and there are strong impediments to a powerful domestic led recovery.”

Hours worked fell 1.9% quarter on quarter, to be down 3.5% in the year.Some 312,000 people were enrolled in formal study in the June quarter, up 12% from the same period a year earlier.

Last month, Prime Minister John Key said he expects job losses to continue into next year, even as the economy begins to recovery at the tail-end of 2009. Lagging unemployment “is the consequence of a very long recession,” he told the Parliament.

This week, Key announced a $152 million package to create new work, education and trading opportunities for people under the age of 25. The proposal was criticised by unions, which claimed the scheme was subsidising employers to forego older staff in favour of younger people. Still, lobby group Business New Zealand threw its weight behind the initiative.

Australian employment data out today will probably show a similar trend, with the jobless rate to rise to 6% from 5.8%, according to a Reuters survey, while US non-farm payrolls out on Friday in the US could be worse than expected after ADP employment data showed companies shed more jobs than forecast.

Businesswire.co.nz

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