Sharp falls in unemployment and underutilisation

Spare labour capacity shrinks

The number of people underutilised also fell sharply over the quarter, falling 13.3 percent (down 48,000 people) to reach 315,000 – the largest quarterly percentage fall since the series began in 2004.

This fall was seen across all three main components of underutilisation (unemployment, underemployment, and the potential labour force) as they fell by roughly equal amounts.

The fall in the underutilisation rate, down 1.6 percentage points to 10.5 percent, is the largest since the March 2013 quarter and second largest fall on record.

Labour market statistics: June 2021 quarter contains more detail on these changes.

While the total number of underutilised people has remained relatively unchanged since the global financial crisis, the underutilisation rate has been trending downward since 2009 until the March 2020 quarter.

After observing sudden increases in the underutilisation rate last year as a result of COVID-19 lockdown measures, this quarter saw some of the largest decreases, in quarterly percentage terms, across all components of underutilisation.

“The large decrease in underutilisation shows that spare capacity in the labour market is dwindling, which can potentially result in tighter labour market conditions and lead to upwards pressure on wage rates,” Mr Broughton said.

Tightening labour market puts pressure on wages has more information on wage inflation.

Employment strong across the board

Alongside the rapid fall in the unemployment rate, the seasonally adjusted employment rate increased to 67.6 percent, up 0.5 percentage points on a quarterly basis and 0.6 percentage points over the year.

“Growth in the working-age population has slowed since the June 2020 quarter, as travel restrictions have resulted in large reductions in net migration. The number of people employed has increased faster than the total population, contributing to the increase seen in the employment rate,” Mr Broughton said.

Within the overall annual increase of 46,000 employed people (up 1.7 percent), both full-time and part-time employment grew: full-time employment was up 24,000 (1.1 percent) and part-time employment was up 22,000 (4.0 percent).

The number of filled jobs, as measured in the monthly employment indicator (MEI), also increased. Using a three-month average of actual filled jobs, the June 2021 quarter was 2.2 percent higher than the June 2020 quarter.

Filled jobs, as measured by the Quarterly Employment Survey (QES), also increased, up by a seasonally adjusted 2.4 percent (48,200 jobs) over the year.

International experiences vary

Labour market activity in other countries continues to be varied, and reflects differences in responses to the COVID-19 pandemic. We have examined how New Zealand compares with selected OECD member countries as they grappled with COVID-19.

Australia has returned to its pre-COVID-19 harmonised unemployment rate and has its lowest unemployment rate in a decade.

“Our hoa (friends) across the Tasman have experienced similar abrupt falls in unemployment in recent months, as borders in both Aotearoa New Zealand and Australia have remained restricted while demand for labour has been strong,” Mr Broughton said.

New Zealand was ranked eighth across 38 OECD countries for the unemployment rate in the June 2021 quarter at 4.0 percent, moving up from 13th place from the June 2019 quarter. In terms of the employment rate (for 15-64-year-olds), New Zealand was ranked third equal with Japan at 77.6 percent for the June 2021 quarter, having moved up from fifth equal from the June 2019 quarter.

New Zealand has seen more rapid improvements in its unemployment and employment rankings, as COVID-19 has continued to impact different countries to varying degrees.