Stats NZ released the March Quarter Labour Market Report which reported that the unemployment fell to 4.2% in the first three months of the year, from 4.3% in the final quarter of 2018. Economists expected a jobless rate of 4.3%. The number of people unemployed declined at a faster rate than the number of people in the labour force. The result was the unemployment rate falling close to its 10-year low of 4.0%, set in mid-2018. The labour market underutilisation rate was 11.3% in the first quarter, the lowest rate since the December 2008 quarter.

The Numbers

-4,000:  The economy lost 4,000 jobs in the first quarter of 2019.

4.2%: The unemployment rate fell to 4.2%.

2.0%: Overall wages increased  2.0% over the last year.

The Good

Stats NZ released the March Quarter Labour Market Report which reported that the unemployment fell to 4.2% in the first three months of the year, from 4.3% in the final quarter of 2018 and beating analyst expectations. The number of unemployed declined at a faster rate than the number of people in the labour force. As a result, the unemployment rate fell close to its 10-year low of 4.0% set last year. Compared to last year, 38,200 more people were employed, an increase of 1.5% – comprised of 25,400 women and 12,800 men.

The labour market underutilisation rate was 11.3% in the first quarter, the lowest rate since the fourth quarter of 2008. Underutilisation provides a broad gauge of untapped capacity in New Zealand’s labour market. In the first quarter, the number of people underutilised decreased by 14,000 to 324,000. There were 8,000 fewer underutilised women and 6,000 fewer underutilised men.

The Bad

For the first time in more than four years, the New Zealand economy lost jobs. In addition, the number of jobs created over the past year was slightly more than half the rate of the previous year.  Coupled together, these figures indicate a weakening and possible end of the steady job market growth seen in recent years. The slowing job market may have implications for the economy as a whole as Stats NZ Senior Manager Jason Attewell noted:

“Generally, employment growth tends to lag broader economic growth by about three months, New Zealand has seen a softening of economic growth as measured by gross domestic product over the last six months, and we now are seeing that softening come through the employment rate.”

Wage growth is also frustratingly low, even in a tight labour market, as the New Zealand Herald reports:

“ANZ economists have picked unemployment to remain flat at 4.3% although they acknowledge risks in either direction depending on the flow through from business confidence.

Regardless, it looks set to remain at levels which economists often describe technically as ‘full employment.’

That has led to some debate as to why wage growth has remained so subdued. In fact, it has been a major source of economic uncertainty globally as well as locally.

‘More significant government-related increases are likely to come later in the year,’ Westpac’s Gordon says.

‘Wage growth tends to lag the broader economic cycle. Even if the demand for new workers is fading, there appears to be enough accumulated pressure in the labour market to support a pickup in wage growth over the next couple of years.’

ASB’s Mark Smith described this year as a pivotal one for wage trends.

‘Our view had been that stretched labour market capacity and the boost to wages provided by minimum wage increases and moves towards more Fair Pay agreements would be sufficient to trigger a generalised firming in overall wages,’ he wrote.

‘The failure to date for wages to come to the party has challenged that view.’”

The Unknown

What will the impact of new technology be on New Zealand’s future workforce? The New Zealand government asked the Productivity Commission to conduct an inquiry into technological change and the future of work. The result is an issues paper that presents four possible scenarios as presented in CIO Magazine:

1. More Tech More Jobs: Technology adoption accelerates in this scenario, and the technologies adopted create more jobs than they replace. Both capital and labour productivity rise in this scenario, perhaps substantially.
2. More Tech and Fewer Jobs: This scenario, in common with the first one, is driven by accelerating technology adoption. However, it differs in that the technology adopted is, overall, labour replacing. Capital productivity rises substantially in this scenario, as firms increasingly adopt productivity-enhancing technologies. Labour productivity might also rise, as lower-skilled roles are increasingly automated. An expected consequence of this combination of drivers is widespread unemployment.
3. Stagnation: In this scenario, the pace of technological adoption slows. This could be due to declining innovation, as technological bottlenecks prove harder to overcome than expected. Alternatively, slower change could occur as technology adoption by firms slows – perhaps because newer technologies are less productivity enhancing for firms than those of the past.
4. Steady As: In this scenario, the technological drivers of labour market change over the next one-to-two decades stay within the bounds of New Zealand experience over the past one-to-two decades. This future offers ongoing change, according to the paper, but the rate of that change is roughly that which New Zealanders are familiar with.

Regardless of how or whether these scenarios take place in New Zealand’s economic future, New Zealanders appear to be unconcerned about losing their jobs to technology. The New Zealand Herald reports that a  recent Massey University study found 87.5% of respondents either disagreed or strongly disagreed with the statement “smart technology, artificial intelligence, robotics or algorithms could take my job.”

The 25,700 jobs added in March were in line with analyst expectations. The increase was made up entirely by full-time positions, which surged up 48,300. That was offset by a decrease of 22,600 part-time jobs. The unemployment rate fell to 5%, a slight increase from February’s eight-year low of 4.9%, but it is due in an increase in Australians participating in the workforce.

The Numbers

25,700: The Australian economy added 25,700 jobs in March.

5.0%: The Australian unemployment rate rose to 5.0%.

65.7%: Labour force participation rose to 65.7%.

+7: The Business Confidence Index increased to +7 in the latest NAB release.

Upside

Despite the increase in the unemployment rate, the March numbers are good news for the Australian economy. According to Reuters, analysts expected an increase in employment of just 12,000. The economy added more than double that number. The largest increases were in Queensland with 10,400 jobs and Victoria with 10,000.

Full-time employment rose by 48,300 in March, which was offset by a decrease of 22,600 in part-time jobs. Experts say these numbers point to a “fundamentally healthy” Australian economy.

Additionally, the reason for the increase in the unemployment rate is because more Australians entered the job market in March, bringing the labor participation rate up to 65.7%.

Downside

While the overall numbers are positive, experts say they notice some concerning trends. The under-employment rate, which measures the proportion of the workforce that have a job but would like to work more hours, increased to 8.2%, and labour market underutilisation, which is the broadest measure of labour market slack including both unemployed and underemployed workers, also increased to 13.2%.

Experts say that these figures suggest Australia will continue to experience sluggish wage growth. They also expect unemployment to increase further by the end of 2019.

Unknown

The new numbers raise questions about when the Reserve Bank of Australia will cut rates. The West Australian reports:

“Some private economists now believe the RBA will have to cut rates three times over the next 18 months – by 0.75 points – because nationwide inflation is tracking near a three-year low, wages are hardly rising, and key employment markets are struggling. That would put the official interest rate at 0.75% – historically unprecedented territory.”

The West Australian

The April Labour Market Report released by the Office for National Statistics posted record-breaking numbers for the nation’s labour market. In the three months covering December 2018 through February 2019, the highest level of people were working in the UK since comparable records have been kept. Nominal wages rose by 3.4%, the same as last month. This wage level reported in the last two months is the highest year-over-year level in over a decade.

The Numbers

• The number of people working in the UK rose by 179,000 to 32.72 million. This is the highest figure since records began in 1971.
• The unemployment rate held at 3.9%, excluding last month’s report, this is the lowest rate since 1975.
• The UK economic inactivity rate was estimated at 20.7%, with 213,000 fewer inactive individuals than a year earlier.
• Compared to a year earlier, 457,000 more people were working in the UK.
• The employment level for men was estimated at 80.5%; it has not been higher since December 1990 to February 1991. For women, the employment level was estimated at 71.8%, the highest level on record. (The increase in the employment rate for women in recent years is due partly to changes to the state pension age for women, resulting in fewer women retiring between the ages of 60 and 65 years.)

After a Brexit Extension is Granted There is Good News for the Labour Market

The European Union extended the date for the UK’s formal exit (Brexit) to October 31, 2019. This labour market report covers a period when Brexit was expected to take place at the end of March. While there is no more clarity about what Brexit will look like, if it happens at all, the good news about the labour market was greeted with less anxiety than in previous months when Brexit appeared to be nearly imminent.

Much of the good news was due to a decrease of workers from the EU and the increase in women in the nation’s workforce as the Financial Times reports:

“Britain’s jobs market has been robust despite wider concerns about the future of the economy after Brexit. With unemployment at the lowest rate since 1974 and fewer workers coming from the EU, UK businesses have sought new sources of labour. ‘The growth in employment was driven mainly by the number of women getting into jobs,’ the Office for National Statistics said. Its latest labour market data showed women accounted for 80% of the 179,000 increase in employment during the three months…”

The Financial Times notes that patterns of recruitment are changing for some employers reflecting the increased level of women in the workforce and a post-Brexit environment:

“Last month, budget hotel chain Travelodge said it was targeting working mothers with new shift patterns to manage Brexit-related staffing shortages. Amber Rudd, work and pensions secretary, said it was ‘particularly pleasing to see there are now a record number of women in work and a record number of people with secure, full-time jobs.’”

Record Job Openings are a Challenge for Employers

The high number of job openings is a fundamental component in the difficult environment that UK employers find themselves. Commenting on the April Labour Market report, Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), commented:

“The strong increase in employment, coupled with another fall in the number of people out of work, suggests that the UK labour market remains in good order.However, behind the strong headline figures, a number of key challenges remain. Businesses are increasingly reporting that persistent hiring difficulties, cost pressures and ongoing uncertainty are dampening recruitment intentions. If this trend is sustained it could well translate into a weakening in UK jobs growth over the next year. Pay growth continues to comfortably outstrip price growth, and in real terms is likely to remain in positive territory for some time to come. However, the combination of a sluggish economy, weak productivity and high upfront costs for business is likely to limit the extent of pay rises. The record high number of job vacancies is further confirmation of the perennial skills shortages plaguing UK businesses, which continues to hold back business activity and growth. To protect the long-term health of the UK labour market, businesses need answers to key questions on how firms will be able to manage their future workforce needs over the next few years. Brexit has distracted government and Westminster for too long, much more must be done at home to address the UK’s chronic skills shortage, including easing the burden of upfront business costs to help firms to hire and train staff.”

More than at any time in recent economic history, it is clear that those enterprises that have a strong employer brand as well as a solid recruitment and retention program will be the clear winners in this difficult market.

Temporary Workers – An Overlooked Source of Talent?

Of the 1.54 million temporary employees during the period ended February 2019, more than a quarter were temporary because they could not find a permanent job. These workers could be in positions where they have the skills to do their jobs but have been unable to find full-time work. Of course, geographic and other factors may play a part in their inability to find full-time work, but with so many permanent job openings available, there appears to be a disconnect between employers and this large pool of talent. As the Guardian notes:

“..Nor is there much evidence of a big switch to the hiring of temporary workers in the three months to February – a period when Brexit uncertainty was ratcheting up. The 179,000 increase in employment was split 138,000 full-time and 41,000 part-time. Self-employment was down by 23,000.”

The Guardian

Employers that can successfully recruit from this large pool of temporary workers could have an important advantage in filling their open positions and have a competitive edge in attracting increasingly scarce available talent.

Statistics Canada reported that the nation’s unemployment remained at 5.8% and that the nation lost 7,200 jobs in March after two months of healthy job gains. Market expectations were for an increase of 10,000 jobs. The March employment report showed the number of full-time positions contracted by approximately 6,400, whereas part-time jobs were roughly unchanged, with a net decline of approximately 900. Weekly annual wage increases were up 2.2% and hourly wages increased by 2.4%. The increase in wages still falls short of the wage growth in mid-2018.

The Numbers

7,200: The economy lost 7,200 jobs in March.

5.8%: The unemployment rate remained at 5.8%.

2.2%: Weekly wages increased 2.2% over the last year.

The Good

While the March Labour Market report released by Statistics Canada showed net job losses in March, the first quarter of 2019 saw 116,000 jobs added to the economy. On a year-over-year basis, employment grew by 332,000 (+1.8%), with gains in both full- (+204,000) and part-time (+128,000) work. Over the same period, total hours worked rose by 0.9%.

Despite the results in March falling below analyst expectations, the news was not received with particular concern:

“We got a little dip in employment, but the numbers are volatile and it’s been on a pretty strong run over the prior half year,” said Nathan Janzen, senior economist at Royal Bank of Canada.

Analysts said the small decline in March, following six months of consecutive gains, was unlikely to alter the Bank of Canada’s view of employment as a bright spot in Canada’s economy.

“After such a strong run of employment gains, a modest pull-back in March is of little concern to us and won’t raise many eyebrows at the Bank of Canada either,” said Andrew Grantham, Senior Economist at CIBC Capital Markets, in a note.”

The March reports also showed that more Canadians were working in the finance, insurance, real estate, rental and leasing industry and in public administration.

The labour market continued to improve in terms of wage increases. Annual hourly wage gains accelerated to 2.4% in March, the fastest annual gain since September, up from 2.3% in February. Pay gains for permanent employees rose to 2.3%, the strongest increase since August.

The Bad

Although the losses were modest, the March report was the first to report a decrease in jobs in seven months. Employment declined in health care and social assistance; in business, building and other support services; and in accommodation and food services. Canada’s two most populous provinces, Ontario and Quebec, lost jobs March.

While wage growth continues to pick steam, the rate of increase is smaller than in mid-2018. Concern over low wage growth was reflected in a recent poll conducted on behalf of  Indeed Canada which showed that  more than half of those surveyed plan to ask for a raise in 2019:

“Conducted by Censuswide on behalf of job site Indeed Canada, the research found that only 13% of Canadian workers surveyed are comfortable with their current rate of pay. That’s down from 17% from when Indeed commissioned the same survey one year ago.

The decline in salary satisfaction will prompt 53% of respondents to ask for more pay this year, the survey found.”

Widespread dissatisfaction over wages is a concern for Canadian employers because of pressure to raise salaries for their current workforce which may be prompted to look elsewhere to increase their incomes.

The Unknown

The US-Mexico-Canada (USMCA) trade agreement which was signed by the heads of state of the three respective countries has yet to be ratified by any of their legislatures. The agreement, which was created to replace NAFTA, could have a significant effect on important sectors in the Canadian economy.  However, it is unclear what a final version of the USMCA would look like and whether it will be implemented at all. The Canadian Foreign Minister warned that changes to the original agreement could lead to chaos:

“Canadian Foreign Minister Chrystia Freeland on Thursday cautioned against the idea of reopening a new continental trade pact with the United States and Mexico, saying it could be a ‘Pandora’s box.’

U.S. House Speaker Nancy Pelosi told Politico this week that changes needed to be made to the text of the United States-Mexico-Canada (USMCA) trade deal to ensure its labor provisions could be enforced.

‘When it comes to the issue of actually opening up the agreement, that’s where Canada’s view is, we’ve done our deal,’ Freeland told reporters on the sidelines of a NATO meeting in Washington when asked about Pelosi’s comments.

‘This was a very intense negotiation. A lot of time, a lot of effort went into it, compromises were made on all sides, and we believe that people need to be very careful around opening up what could really be a Pandora’s box,’ she added…

‘Canada has done its share, we have done our work, and now it’s up to each country to work on ratification,” said Freeland.

She reiterated that Canada could find it hard to press ahead with efforts to ratify the treaty as long as U.S. maintained tariffs on imports of Canadians steel and aluminum.”