Unemployment rate rises to 5.4pc

By NZPA

Thursday 7th November 2002

High immigration was a significant factor in a surprise rise in the unemployment rate, although economists said today that was not a reason to turn off the migration tap.

The jobless rate rose from a 14-year low of 5.1 percent in the June quarter to 5.4 percent in the September quarter, according to the Household Labour Force Survey published today.

During the quarter, the workforce expanded by 12,900 of which 8700 were immigrants.

Some 50,000 new jobs have been created in the year but the workforce has swollen by 56,100 -- of which 29,400 were work-age migrants.

Around 4000 new jobs were created in the quarter, but unlike in the March and June quarter when the economy absorbed record numbers of immigrants, they struggled to find sufficient jobs in this quarter.

Westpac economist Donna Purdue blamed the unemployed lift on a dent in business confidence, causing firms to shelve some expansion plans.

All the indicators had suggested much stronger employment growth.

"This is maybe a temporary adjustment because of the slump in business confidence. Firms looked to have regained some of that confidence, so going forward we are still anticipating modest employment growth."

She expected further big inflows into the workforce and saw no reason for that to stop as immigration helped alleviate a skill shortage in a tight labour market.

"5.4 percent is still a very low unemployment rate for New Zealand. There are still tight labour market conditions but it has eased off a little from where we were and that is a reflection of business being a little more uncertain of what's going on in the international environment and how that will affect New Zealand."

Immigration was a big factor in stimulating New Zealand's strong economic growth of 3.5 percent in the June year, resulting in a boost to construction and house prices and stimulating retail sales, Ms Purdue said.

Demand for construction workers was a big factor in the net 3000 new jobs created during the quarter.

Deutsche Bank chief economist Ulf Schoefisch said the export sector had shown signs of pressure as a result of the exchange rate rising

"The domestic sector and the service sector are doing fairly well with a lot of migrants pushing into the economy supporting the housing market and needing to buy a lot of basics to get their households established in New Zealand," he said.

Employment Minister Steve Maharey's spin on today's figures was that the "brain stay" factor had affected the labour market.

"More New Zealanders are choosing to remain at home rather than leave for overseas and this has boosted the number of people in the labour force," he said.

The work participation rate remained at an historically high 66.6 percent, unchanged from the June quarter.

The quarterly employment growth rate, closely watched by economists, halved to 0.2 percent and was half forecast.

As a result, the Reserve Bank considered even less likely to hike interest rates, especially after the Federal Reserve today aggressively cut US rates by half a percentage point to spur its droopy economy.

Full-time employment growth increased 0.3 percent in the quarter and there have been 43,000 new full-time jobs created in the year against 8000 part-time jobs.

New Zealand ranks tenth equal with Britain and Sweden in the OECD unemployment stakes and well ahead of Australia's rate of 6.2 percent.

The Maori unemployment rate rose to 12 percent from 11 percent in the June quarter while the Pacific Island rate fell to 9.3 percent from 9.7 percent.

The youth unemployment rate (15-19 years) fell to 14.4 percent from the June quarter rate of 15.1 percent.

The worst hit regions were Canterbury and Otago where the unemployment rate rose by 0.9 percentage points to 5.6 percent and 6.6 percent respectively.

Northland has the worst unemployment rate but its rate fell in the quarter to 8.3 percent from 8.4 percent.

The lowest rate was in the West Coast/Nelson/Marlborough region where the rate fell from 4.0 percent to 2.3 percent.

The Auckland rate fell to 5.0 percent from 5.1 percent in the June quarter.

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