Tāmaki Makaurau – The labour market is beginning to loosen up as demand for new workers starts to dry up. However, for now, wages continue to rise at record pace, national economic forecaster Berl says.
Labour market data for the December 2022 quarter shows that although the market remained tight, there are some signs that the demand for labour may be waning.
Unemployment increased slightly to 3.4 percent, and underutilisation, a broader measure of spare capacity, increased from nine percent to 9.4 percent, Berl says.
However, the employment rate (69.3 percent) and the labour force participation rate (71.7 percent) remained at historical highs. Low migration, coupled with extremely low unemployment for the past year and a half, means that there was not much room for growth anyway.
The full impacts of the economic slowdown have not yet taken effect. However, there is some caution in the air, especially for businesses.
In response to the tougher times anticipated for 2023 businesses will, firstly, stop hiring new staff. Online job advertisements fell 4.2 percent between the September and December 2022 quarters.
The only industry that had any growth in job advertisements was the hospitality industry (up 1.5 percent during the quarter).
Although business and individuals are cautious about what 2023 will look like, employers have not yet started to reduce staff numbers and hours.
Hours worked continued to increase strongly, growing by 1.4 percent during the quarter (3.6 percent on an annual basis). Data on filled jobs also showed an annual reduction in part-time jobs (5.2 percent), and an increase in full-time employment (3.7 percent).
Wage growth, which only started to pick up pace towards the middle of 2022, continued its upwards trend. Average hourly earnings growth (in the private sector) continued to surpass general inflation, growing by 8.1 percent during the year. And the adjusted labour cost index for the private sector rose by 4.3 percent (1.1 percent quarterly).
These wage increases were widespread with nearly two-thirds of all jobs experiencing an increase in salary and ordinary time wages. Thirty-six percent of jobs saw an increase of over five percent, the highest share ever.
Looking ahead, a few key factors will influence how the market shapes up this year and beyond. The return of migrants, along with a slowdown in new hiring, will steadily push up unemployment.
As tougher economic conditions kick in, resulting from interest rate hikes, unemployment will increase further. The Reserve Bank sees unemployment reaching 5.7 percent by the first quarter of 2025. Wage inflation, which tends to be sticky, is expected to continue to increase over the next few quarters, but the current pace is unlikely to be sustained into 2024.
