Labour market confidence rises but outlook for new jobs declines
Employment confidence is at its highest level in nearly a decade, indicating a positive future for wages growth and job security.
But the outlook for growth in jobs is less certain, due to the drop in business confidence since the election.
The Labour-led coalition government is planning to restore workplace legislation back to before National took power in late 2008 – moves that will give employers less flexibility in hiring, firing and setting wage levels.
The minimum wage is also set to rise sharply to $20 an hour by 2021, from the new rate of $16.25 an hour from Sunday, April 1.
This and the proposed Employment Relations Amendment Bill will add to employers’ costs and likely lead to job losses if the economy slows.
The Westpac McDermott Miller Employment Confidence Index rose two points to 115.9 in March, its highest level since September 2008, just as the global financial crisis was about to hit.
The index measures employment opportunities, wage expectations and job security.
The latest upward move shows a slight rise in past and expected earnings growth, and an improvement in job security, compared with December.
Recovery from GFC
Westpac senior economist Michael Gordon says this reflects the 10-year-old recovery from the GFC.
“Unemployment was initially slow to respond as job opportunities remained thin on the ground but both measures are now moving closer to pre-crisis levels,” he says.
“Perceptions of earnings growth are at their highest in three years, albeit by a small margin. These measures have yet to establish a consistent upward trend, even as the labour market has tightened.”
However, perceptions about job opportunities were down slightly in the March quarter.
“Business confidence fell sharply in the wake of last year’s election,” Mr Gordon says. “We’re wary of any sign that this is translating into firms’ hiring decisions. The fall in perceived job prospects in the March quarter is not large enough to be cause for concern.
“But it does suggest that unemployment may struggle to push much lower in the near term.”
The regions show a great deal in variation, with Southland rising strongly along with Bay of Plenty, while Nelson-Marlborough-West Coast fell.
The latter area was badly affected by storm damage from two cyclones earlier this year. Northland's confidence has also fallen during the quarter.
McDermott Miller’s Richard Miller says March’s positive lift in sentiment offsets the stall in rising confidence in the December quarter.
“Happily, this March quarter employment optimism is widespread, with increases in confidence registering on the Employment Confidence Indices of most respondent categories,” he says.