What Lies Ahead
Posted on 24th February 2015 by Tony Alexander
The following is an excerpt from the BNZ Chief Economist Tony Alexander predicting what lies ahead in his monthly article the NZ Observer” For the purpose of easy reading we have posted the following content as it pertains to employment.
What Lies Ahead? New Zealand’s economy has grown well over the past four years with growth averaging 2.1% and 2.9% growth achieved in the year to September. Better success is seen in the employment statistics with job numbers ahead 221,000 since 2009 and up 3.5% last year with full-time employment ahead 3.8%. Median household incomes have risen on average 2.9% per annum the past five years with the growth of 4.7% last year and 4.1% the year before that.
Employment Jobs growth is very strong, at the end of last year employment was 3.5% ahead of a year earlier with fulltime job numbers up 3,8%. People are so confident of finding work that the participation rate (the proportion of the working age population in work or actively looking for it) rose to a record high of 69.7%.
Employer demand for people is also strong with the NZIER’s Quarterly Survey of Business Opinion showing a net 21% of non-farm businesses planning to hire more people. The average reading is just 3% and the latest result is the strongest since 2004.
The NZ Observer Page 8 Household Incomes There is essentially zero evidence that wages growth is yet accelerating – as shown in the first graph below. However, when we take into account the sharp growth in employment we get a rise in total gross household incomes for all NZ in the year to June 2014 of over 7%
Labor market The proportion of the working age population already in work or actively looking for it is already at a record high of almost 70%. This compares with near 63% in the United States and 65% in Australia. For now, the migration boom is keeping wages growth suppressed. But eventually labor availability will decline substantially, there will be a wages response, and firms will need to think less about expansion and more about boosting profits through cutting output and raising prices.
That is not a story however for this year but more late-2016 through 2017-18. Given their relatively high turnover of staff, below average remuneration, and exposure to loss of key personnel, the tightening labor market will be far more of a problem for SMEs and Small businesses particularly than Large companies with 100 or more staff.