In the March quarter, the unemployment rate in New Zealand decreased slightly to 5.3%. At first glance, that seems like good news. However, if you take a few minutes to look at the specifics behind that figure, the image becomes much less comforting. 163,000 people are still unemployed, which is 7,000 more than a year ago. The modest improvement over the prior quarter seems more like a pause before the next wave arrives than a recovery.
Jarrod Kerr, chief economist at Kiwibank, was direct about it. He referred to the March data as “very outdated,” pointing out that the statistics still don’t fully reflect the true shock, which is the disruption brought on by the Iran War and the fuel crisis it caused. Kerr predicts that unemployment will be 5.5 percent, but if things don’t improve, he doesn’t rule out 5.8 or even 6 percent. That is not a fringe viewpoint. Nick Tuffley, chief economist at ASB, is also predicting 5.5%.
There’s a feeling that what’s already taking place on the ground is surpassing the scope of the quarterly statistics. Projects related to construction are being delayed. Cutting timber has become too costly to justify, so forestry crews are being laid off. Six months ago, the economics that kept some industries afloat have quietly stopped functioning.
The aspect of this that receives insufficient attention is tourism. It was New Zealand’s biggest export earner prior to Covid, surpassing dairy. It has never completely recovered, and it is currently under new strain due to rising airfares and flight delays related to the Middle East conflict. Regional economies that had been resilient due to the strength of their exports now appear vulnerable. Kerr put it simply: a declining tourism industry is more than just a line item in a national report; it is a major issue for many regions of the nation.
The underutilization rate, or the percentage of employed individuals who wish to work more hours, is also instructive. That percentage remains stubbornly at 12.9 percent. Because it shows what companies are doing before they start eliminating jobs outright, economists frequently keep a closer eye on this figure than the headline unemployment rate. First, hours are cut. Payroll remains unchanged, but the amount of work quietly decreases. Before the official numbers change, that is the slack that accumulates. There is a lot of it at the moment.
It’s especially hard to sit with the picture of young people. For those aged 15 to 24, the unemployment rate increased from 13.3 to 14.4 percent. Co-founder of Kickback, a youth development organization, Aaron Hendry works with young people who have experienced homelessness and severe adversity and who are in dire need of work. His description of what they’re going through is remarkable for its everydayness rather than its drama. These young people have completed training courses, constantly revised their resumes, volunteered, and participated in all available programs. They’re still stuck, too. It’s difficult to ignore the damage that prolonged rejection causes to a person’s sense of self, particularly at a young age when identity is still developing.
There are significant regional disparities in the crisis. In the March quarter, Auckland’s unemployment rate increased from 6.4 to 6.6 percent. Wellington’s percentage increased from 5.8 to 6.3 percent, continuing a period that Kerr accurately referred to as a “very dark place.” Public sector job cuts have contributed to the capital’s hollowing out, and business sentiment there has been persistently negative. Kerr pointed out that Auckland isn’t much better. In comparison, Canterbury’s rate is 4.4%, which is higher than it was previously but still significantly lower than that of the northern cities. The two biggest cities on the North Island are delaying what ought to be a national recovery.
It’s still unclear if the recovery that Finance Minister Nicola Willis claims is “starting to latch on” will be able to withstand the mounting pressure from outside New Zealand. It is evident that the headline unemployment rate, which slightly decreased and prompted cautiously optimistic commentary, is working hard to hide the true situation. In Auckland, it was higher than eleven years ago. In Wellington, it was higher than twelve years ago. An economy that used to be the envy of the area is now striving to halt the decline.
