Employment confidence up, though pay expectations are at GFC levels
New Zealanders became slightly more confident about job opportunities in the third quarter, though fewer people predicted a pay rise in the coming year.
The Westpac McDermott Miller employment confidence index rose 0.4 points to 113.8 in the September quarter, the highest level since before the global financial crisis in 2008, with the present conditions index up 1.9 points to 115.7 while the employment expectations index dropped 0.6 points to 112.6. Confidence was strongest in Auckland, and firm in Waikato, Bay of Plenty and Canterbury, while it remained low in Wellington.
Expected earnings growth dropped 3.2 points to a net 25.3 percent of employees who anticipate a pay rise over the coming year, which senior economist Satish Ranchhod said was around the confidence levels seen during the GFC.
"In part, these concerns about future earnings growth are likely to be a reflection of the very muted wage growth we've seen in recent years," Ranchhod said in his report. "Despite continued economic growth and increases in employment, wages are still only growing by around 1.7 percent per annum. That's not much different from the lows that we saw during the financial crisis".
New Zealand's strong run of economic growth has been supported by a nationwide construction boom, record tourism, strong inbound migration, and the recent recovery in the dairy sector. The net inflow of migrants has largely kept wages flat, even as firms find it increasingly hard to attract skilled labour.
Today's employment confidence survey shows of the 1,553 people surveyed, a net 29.8 percent experienced past earnings growth, up from 27.8 percent in the June quarter.
Ranchhod said earnings expectations were weak across all income groups and around the country, but particularly acute in regions like the Bay of Plenty, Wellington, Southland and Nelson/Marlborough. Consumer price inflation, which has risen to 1.7 percent annually after staying below 1 percent for the past few years, has also weakened consumer sentiment, he said.
"The limited pay rises many workers have received have only just been keeping pace with changes in the cost of living. And for those workers who didn't receive a pay rise (and even for some that did), their spending power may be going backwards."
The survey showed a net 1.7 percent of those surveyed saw more job opportunities currently, an improvement from a net -0.1 percent in June, while pessimism about expected job opportunities also improved to -0.5 percent from -4.3 percent.
More people were happier with their job security at a net 15 percent saying they expect to be more secure over the coming year compared to 11 percent in March.