The Times Australia
Mirvac Harbourside
Business and Money

Latest NZ unemployment figure may not give a true picture of the number of people out of work

  • Written by Ananish Chaudhuri, Professor of Behavioural and Experimental Economics, University of Auckland
Latest NZ unemployment figure may not give a true picture of the number of people out of work

New Zealand’s unemployment rate dropped to 4.9%[1] in the December quarter, down from 5.3% in the previous quarter. One commentator argued[2] this drop clearly establishes that a strong health response from the government was also the best economic response.

That may well be true but the conclusion is not obvious based on the data we have at our disposal.

The Stats NZ report[3] that provides the unemployment information also points out that despite this quarterly fall, the number of unemployed people is still 25,000 (about 22%) higher than it was a year ago.

More people on job keeper support

In the meantime, according to the Ministry of Social Development[4], the number of people receiving “job seeker–work ready” support has increased from about 85,000 in January 2020 to 135,000 in January 2021, a net increase of 50,000.

Read more: As NZ gets serious about climate change, can electricity replace fossil fuels in time?[5]

In fact, the number of recipients jumped dramatically[6] from around 85,000 to around 120,000 by the middle of 2020 with a modest increase after that.

Something here seems amiss because if the unemployment rate drops then the number of job seeker benefit recipients should drop as well.

The unemployment rate for the economy is defined as the fraction of those unemployed out of those in the labour force.

On the basis of Stats NZ’s household labour force survey data[7] we know that the 4.9% unemployment rate comes from a total of 141,000 unemployed out of 2,874,000 in the labour force.

To be categorised as unemployed in New Zealand, a person aged 15 or more must not have a paid job, must be available to start work and have been actively seeking work in the last four weeks or be due to start a new job in the next four weeks.

Who’s ‘actively seeking work’?

I think it is the “actively seeking work” part that is a source of contention since it is entirely possible there are people capable of working but not actively looking (or have given up looking) who are not considered part of the labour force.

What if we assume that since the start of 2020, there are an additional 50,000 people — as the job seeker figure would indicate - who could be working but are not?

This changes the December quarter unemployment rate to about 6.5%, which is higher than the previous quarter reported.

But what may be of more immediate concern is the level of underutilised labour in the economy. Stats NZ’s underutilisation rate[8] is a better measure of this.

This measures the total number of people who are unemployed, underemployed (working part-time but with the desire and availability to increase their hours), or currently not in the labour force.

On the plus side, this underutilisation rate has fallen from 13.2% of the labour force to 11.9%[9] during the last quarter of 2020. But this is still above where it was in December 2019, when underutilisation was at 10.1%.

According to Stats NZ, in December 2019, NZ’s labour force was 2,830,000 and 10.1% (283,000) were underutilised. By December 2020, the labour force has grown to 2,874,000 and the underutilisation rate is at 11.9%, 342,000 people; an increase of 59,000, which includes the additional 25,000 increase in unemployment.

To be clear, this is not to suggest these other measures are somehow closer to the truth than the unemployment rate. But it appears to me that collectively the increases in jobseeker benefit recipients and the underutilisation rate paint a picture that is less rosy than the 4.9% unemployment rate suggests.

Why the figures matter

This difference matters crucially because the kinds of policies we should espouse if the true unemployment rate is 6.5% (or higher) are different from those we should follow if the unemployment rate is 4.9%, as reported.

Read more: Expect the new normal for NZ's temperature to get warmer[10]

If the latter figure is true then we are truly out of the recession and there is little need for any further pump priming. At the very least the Reserve Bank can stop its quantitative easing and there is very little need for further lowering of interest rates.

Indeed, it may be time to start considering raising the interest rate to thwart inflationary pressures.

But if the underutilisation rate is a better reflection of the underlying economic conditions then the economy is not in great shape. In that case the policy settings need to change and the government would be ill-advised to let up on providing economic stimulus.

Authors: Ananish Chaudhuri, Professor of Behavioural and Experimental Economics, University of Auckland

Read more https://theconversation.com/latest-nz-unemployment-figure-may-not-give-a-true-picture-of-the-number-of-people-out-of-work-155362

Mirvac Harbourside

Business Times

Your CEO Has More Reach Than Your Ad Budget – You’re Just Not Usi…

By Patrice Pandeleos, Managing Director of Seven Communications If your CEO hides behind a logo while competitors build infl...

From Farms to Festivals: How Regional NSW Is Repurposing Shipping…

When you travel through regional NSW, you start to notice how resourceful communities can be. Open paddocks, winding countr...

Nail it with points: Flybuys members can redeem points for instan…

Flybuys launches new in-store redemption at Bunnings stores across Australia Tuesday 19 August, 2025 – Flybuys, Australia’s ...

The Times Features

Macquarie Bank Democratises Agentic AI, Scaling Customer Innovation with Gemini Enterprise

Macquarie’s Banking and Financial Services group (Macquarie Bank), in collaboration with Google ...

Do kids really need vitamin supplements?

Walk down the health aisle of any supermarket and you’ll see shelves lined with brightly packa...

Why is it so shameful to have missing or damaged teeth?

When your teeth and gums are in good condition, you might not even notice their impact on your...

Australian travellers at risk of ATM fee rip-offs according to new data from Wise

Wise, the global technology company building the smartest way to spend and manage money internat...

Does ‘fasted’ cardio help you lose weight? Here’s the science

Every few years, the concept of fasted exercise training pops up all over social media. Faste...

How Music and Culture Are Shaping Family Road Trips in Australia

School holiday season is here, and Aussies aren’t just hitting the road - they’re following the musi...

The Role of Spinal Physiotherapy in Recovery and Long-Term Wellbeing

Back pain and spinal conditions are among the most common reasons people seek medical support, oft...

Italian Lamb Ragu Recipe: The Best Ragù di Agnello for Pasta

Ciao! It’s Friday night, and the weekend is calling for a little Italian magic. What’s better than t...

It’s OK to use paracetamol in pregnancy. Here’s what the science says about the link with autism

United States President Donald Trump has urged pregnant women[1] to avoid paracetamol except in ...