Short Term Jobs Outlook

Wednesday 1st July 2009

The short term employment outlook weakened dramatically between March and June, although working New Zealanders are expecting a bounceback over the next year, according to the June Westpac-McDermott Miller Employment Confidence Index measure of Present Conditions.

The Present Conditions index fell from 84.7 to a deeply pessimistic 77 between March and June, continuing its plunge in line with the advance of both the New Zealand recession since early 2008 and the global credit crunch in the fourth quarter last year.

Present Conditions showed above 150 for much of 2007 and early 2008 but current conditions are "extremely ugly", Westpac says.

However, once aggregated with the forward outlook, the Employment Index as a whole showed a small improvement between March and June from 93.2 to 96.1, buoyed by strengthening belief in an economic recovery in the year ahead.

When the index is above 100, optimists outweigh pessimists, so the overall outlook remains pessimistic. However, the Employment Expectations part of the Index turned sharply positive in June, rising to 108.8, compared with 98.9 in early March.

That's the highest reading since September last year when the global credit crunch pole-axed economic expectations.

"The extent to which sentiment has turned regarding future employment conditions is likely to come as a surprise to the Reserve Bank of New Zealand," Westpac senior economist Donna Purdue said. “The RBNZ is forecasting extremely weak consumer spending over the next two years on the assumption that rising unemployment, slower wage growth and high debt levels will keep consumers cautious.

“Today’s survey results imply that consumers may not be as cautious as the RBNZ thinks.” Indeed, recent data outturns provide support to that view with electronic card transactions showing stronger-than-expected growth in April and May, and household borrowing for May showing the strongest increase since August last year."

While the RBNZ was unlikely to change the Official Cash Rate through 2010 and early 2011, it would probably review its current easing bias, Purdue said.

Businesswire.co.nz

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