The last time figures were this low was right before the GFC. (Photo / Getty)

HDPA: Unemployment figures aren't necessarily a good thing

Author: Heather du Plessis-Allan,
Publish Date: Tue, 6 Aug 2019, 4:50PM

There’s a debate now about whether we’re talking ourselves into an economic funk.

The unemployment figures out today are surprisingly strong. It’s taken most if not all commentators by surprise. It’s down to an 11 year low, sitting at 3.9 per cent. That’s down from 4.4 per cent this time last year

Most economists and pundits thought it was going to head back up in that direction.

And so, cue the talk that maybe things aren’t as bad as we’ve all been thinking.

Well, I wouldn’t get too excited by that unemployment number. That is not necessarily a good thing

What unemployment at 3.9 per cent shows is that employers can’t find workers. When unemployment hits 4.25 per cent, that’s when it’s widely considered that we have full employment in this country.

We’re past that. That’s how tight this labour market it. Employers can’t find workers, at least part of that is because immigration New Zealand is not processing visas for migrant workers fast enough.

What happens then is that employers pay more to get the workers they need. That may explain why the figures out today also show wages are up by 0.8 per cent.

The question is what comes next?

Employers say they’re struggling without staff and with a high wage bills, and that means there’s a real risk they either fall over or end up cutting staff. And we’re seeing that come through in surveys as well. Employers are openly talking about cutting staff.

On their own, these figures might’ve told you it’s good news. And that’s the way the government’s trying to paint it like this is a tick of approval for the Coalition’s economic plan.

But add the freefalling business confidence numbers, consumer confidence that’s just taken a knock, China and the US in an open trade war, the financial hub of Hong Kong erupting in protests, the compliance costs this government has lumped on employers.

And then I wouldn’t be too excited about what these figures are saying at all. And here’s something to consider. The last time unemployment was this low was 2008 - just before the global financial crisis.