Data to show harm

5.5% unemployment rate tipped for quarter

UNEMPLOYMENT figures due out tomorrow will reveal the extent of the economic damage the pandemic has inflicted so far.

All the indications are that the official unemployment rate for the September quarter will still look much better than it was expected to when the pandemic struck in March.

After a surprise fall to 4% in the June quarter, unemployment likely settled at about 5.5% in the September quarter, economists forecast.

That compares extremely well with Treasury’s forecast in April that unemployment would reach 9.8% in the September quarter.

It should also be of note to those making comparisons between New Zealand’s Covid19 recovery and Australia’s — where unemployment is at 6.9%.

The September quarter data, due out tomorrow morning, will provide a cleaner read than the June quarter because it was much less affected by lockdowns.

But it could still have been boosted by wage subsidies as some firms were still dependent on that support during the quarter.

‘‘We expect that employment fell and the unemployment rate rose, but how much is uncertain, depending on how much these supports have reduced or delayed job losses,’’ ANZ economists Liz Kendall and Kyle Uerata said.

They also expected some volatility to remain ‘‘given disruption and measurement difficulties seen last quarter’’.

‘‘Our best educated guess is that the unemployment rate will sit at 5.25.4%, representing a modest deterioration in the labour market.’’

The June quarter Household Labour Force Survey (HLFS) caught everyone off guard by indicating the unemployment rate actually fell to 4%, in the midst of the Covid lockdown, Westpac senior economist Michael Gordon said.

‘‘But the September quarter survey was relatively free of Covid disruptions and measurement issues, so it should give us a cleaner read on labour market conditions,’’ he said.

‘‘We expect the unemployment rate to rise to 5.5%, though there’s a wide range of uncertainty around this number.’’

The Covid lockdown created a significant measurement issue.

‘‘Only those who are actively looking for work are classified as unemployed, but lockdown conditions made this impractical.’’

After Stats NZ included some extra questioning in June about whether people were not looking for work for Covid-related reasons, the ‘‘true’’ unemployment rate appeared to have been more like 4.6%, he said.

That is an increase on the previous quarter, but still well below the range of market forecasts.

ASB senior economist Mike Jones is picking unemployment to have risen to 5.4%.

‘‘There’s usually a pretty close link between economic activity and the jobs market in any given quarter. However, the wage subsidy has changed all that.

‘‘The quick deployment and massive size of the subsidy undoubtedly cushioned the blow of the recession on the labour market. Some of the gloomier unemployment predictions have thus been revised to more palatable levels.’’

ASB expects a 0.7% fall in employment over the quarter and a 0.5 percentage point rebound in the labour force participation rate (to 70.4%).

But while the unemployment figure would be better than first expected, it would not be the peak, he said.

‘‘This is very unlikely to be end of the rising unemployment trend. We have the peak pegged at 6.5% in June 2021,’’ he said.

‘‘Things will get tougher.’’ — The New Zealand Herald