Is it working yet?

With the latest job figures showing huge fluctuations in how New Zealand’s regions are coping with unemployment, the Sunday Star-Times dug into the numbers to see if John Key’s claims of falling unemployment stack up.

THERE WERE unusually long queues outside Auckland City Mission last month as people travelled from far and wide to get extra help making ends meet.

Many of them were beneficiaries whose meagre resources wouldn’t stretch to any kind of Christmas cheer. But City Missioner Diane Robertson was quoted as saying that there were new clients coming through the door – households reliant on two incomes who had their income halved by redundancy, or people losing the parttime job that was keeping them off the bread line.

‘‘These are families we haven’t seen before,’’ she said.

Her observation chimed with official figures. The Household Labour Force Survey for the three months to September showed a surprise increase in Auckland unemployment from 7.3 to 8.6 per cent, reversing the improving trend of the previous six months. The ANZ Regional Trends survey in November put Auckland’s unemployment rate even higher at 9.1 per cent. You have to go back to the mid-1990s to find higher jobless figures in our biggest city.

But in other parts of the country, unemployment is less than 5 per cent ( Taranaki and Nelson) and Christchurch is already looking at less than 3 per cent.

A number of factors are at play: immigration, internal migration to Auckland, the strength of the primary sector, and the power of oil and gas to deliver both jobs and an economic uptick.

But it’s what’s happening in Auckland that is having the largest influence on national figures.

Auckland, by a long way the country’s biggest concentration of economic resources, has had the wind taken out of its city of sails. And since Auckland accounts for almost a third of NZ’s labour force, the city’s lurch has been echoed in national figures, up 0.5 per cent to 7.3 per cent, a 13-year high.

Underneath the big numbers there is a crawling mass of data to sift through for signs of what’s to blame, but Auckland Council chief economist Geoff Cooper has an inkling.

‘‘What I’m thinking about a lot is looking at it in terms of education and skills levels. Auckland has some of highest discrepancies in deprivation – a lot of very rich but a lot of very poor people as well. If you look at unemployment rates by education type, you start teasing out some of the reasons why Auckland might have a higher unemployment rate, particularly during recessionary times.’’

(If it seems odd to be talking about recessionary times three years after the recession apparently ended, depending which figures you use, it’s worth remembering this is the slowest recovery in 80 years.)

Statistics New Zealand figures show 10.3 per cent of people with no qualifications were unemployed in September. The rate falls to 8.5 per cent for those with a school qualification and 4.8 per cent for those with post- school qualifications.

You can see the same issue reflected in relative demand for skilled and unskilled labour.

According to respondents in the Quarterly Survey of Business Opinion, run by the Institute of Economic Research, businesses were finding it harder to find skilled staff in the September quarter, but easier to find unskilled staff.

Meanwhile vacancies for skilled jobs rose in October, particularly in Auckland, according to data compiled by the Ministry of Business, Innovation & Employment. Cooper could be on the right track.

Council figures show Auckland’s unemployment burden is heaviest in the south and west of the city, where most of the lower- skilled jobs are.

You can’t pinpoint particular causes, but it won’t have helped that several significant factory employers announced lay-offs during 2012 – Nuplex, Fisher & Paykel Appliances, Rakon, Flotech, Norman Ellison Carpets, Criterion Manufacturing.

The latest Quarterly Survey of Business Opinion for the December quarter shows businesses are more optimistic about the general economy, saying economic activity was at its highest level since mid2007. The bounce was mainly in Auckland and Canterbury and the pick-up has not yet flowed into jobs, although the Government’s Half Year Economic and Fiscal Update last month said unemployment in March this year would be 6.9 per cent, up from its forecast last May of 5.7 per cent.

The outlook improves from there, but much more slowly than previously thought.

According to the Reserve Bank, two issues may be adding to the current difficulty and both relate to how well the economy matches jobseekers with job vacancies.

One can be traced to New Zealand’s huge churn of migrants. Although there is generally a small net inflow of migrants to New Zealand, a great many people pass each other at the airport – in the year to November more than 80,000 left for the long-term and a similar number arrived.

In a report published last month, the bank said that although the net figure was fairly flat, ‘‘what is striking is the shift since 2010 towards a substantial net outflow of those aged between 35 and 54 (the group with the highest labour force participation rate and the lowest unemployment rate). By contrast, there has still been a net inflow of those aged between 15 and 34’’.

Swapping more experienced workers for less experienced could be contributing to the shortage of skilled labour, the bank hypothesised.

The second factor involves the Canterbury earthquakes, which caused huge disruption in the labour market in the region. As a result, said the bank, ‘‘there has been a change in the pattern of employment – for example, a marked decline in retail and hospitality employment while demand for construction workers and, for example, geotechnical engineers has increased’’.

So, while Canterbury’s unemployment rate was a mere 5.2 per cent, there were also 20,000 fewer people in the labour force compared with two years earlier.

CANTERBURY’S UNEMPLOY

MENT rate is expected to buck the trend and continue to decline this year as the city’s rebuild gathers pace.

The rebuild will need 10,000 to 15,000 extra workers, and demand for workers is expected to peak in late 2014, according to the Canterbury Employment and Skills Board’s draft construction

Overall we’re looking forward to the year coming up as probably better than last year – and last year by no means was a disaster. Employers and Manufacturing Association chief executive

Kim Campbell

sector workforce plan released last month.

It’s likely the bulk of this extra demand would be met by people already in New Zealand. But certain occupations – carpenters, painters, plasterers, bricklayers and stonemasons – will require ‘‘essential’’ immigration.

‘‘Even if more immigrants are brought in, which is a likelihood, I think they will be filling jobs that are largely unable to be filled by locals,’’ UBS New Zealand senior economist Robin Clements said.

‘‘Eventually the pressure will be such that all levels of the labour market will be finding it difficult to find staff to fill the vacancies which will inevitably mean that more people will come off the unemployment ranks to fill those jobs.’’

Canterbury Employers Chamber of Commerce chief executive Peter Townsend expected the rebuild to ‘‘soak up’’ some of the region’s unemployed but said there would always be a ‘‘residual unemployment figure’’ and he could not remember it ever dropping below 3 per cent.

However the scale of the rebuild meant that it was important to bring in workers as they were needed.

‘‘You can’t just turn on a tap when it comes to human resource capacity in the region, it requires a six to nine month lead time,’’ Townsend said.

‘‘It’s not dial-a-tradesman, it’s how we build that capacity in our economy.’’

The effect that building has on employment is apparent in other regions. In Manawatu, large construction projects and Defence Force changes look to be the strong points.

The wider region has planned projects worth tens of millions of dollars, including the $200 million upgrade of Fonterra’s Pahiatua factory, half an hour east of Palmerston North and the $ 75m to improve Massey University’s veterinary school. The Defence Force also has a $15m project on the cards for its air force base at Ohakea.

The unemployment rate for the Manawatu-Whanganui region rose to 8.6 per cent in November, but Palmerston North City Council economic policy adviser Peter Crawford said a 54 per cent rise in new car registrations last year – compared with 21 per cent nationally – was an early indicator of renewed confidence, particularly in the rural/farming sector.

Building consents, while steady in Palmerston North, were rising strongly in the wider district, especially Feilding, which has good quality, affordable land and is close to Palmerston North.

NELSON’S RELATIVELY low

jobless figures (4.5 per cent) were looking for a further boost from a $10.6 million development at Summerset retirement village in Stoke, expected to take up to 150 workers and about 14 months to build, and a $ 9.2m integrated health centre which includes a rest home being built in Takaka, Golden Bay.

Nelson’s unemployment rate has traditionally been better than the rest of the country because of its industry spread; predominantly in the primary sector with fruit, fishing, farming and forestry. The region is the most dependent in the country on the primary sector and although the high exchange rate continues to hit exporters, Nelson Regional Economic Development Agency chief executive Bill Findlater noted that did not greatly affect employment.

‘‘ If the exchange rate is up you’ve still got to harvest your product. It’s not like manufacturing where, if sales are down, you put off people. You can’t do that when you’re dealing with primary products.’’

Taranaki is another region riveted to the primary industry, notably food production, with more than one in five people working in either agriculture, which accounts for approximately 13 per cent of all employment, or food product manufacturing, which adds another 8.4 per cent.

Off this solid farming platform, a resurgent oil and gas industry has made Taranaki the boom province of the country.

At 4.9 per cent, unemployment sits well below the national average and is unlikely to be hit by seasonal fluctuations.

The booming energy sector has resulted in employers offering the highest average salaries in New Zealand, according to the jobfinding website Seek. Venture Taranaki, the region’s economic development agency, said not only was unemployment low, but the region’s labour force had increased as has labour force participation.

VT’s marketing manager Vicki Fairley said the economic benefits of the oil and gas boom flowed right through the economy.

‘‘ Taranaki remains the sweet spot of the country. It is not only about the major oil and gas companies, supply chain spin-offs in the region are significant, especially for those experienced in the engineering and specialist services who are commissioned by the major companies to assist with a range of activities such as surveying, design, technical support and/ or construction.

‘‘These economic benefits flow through the region to industries such as housing, and hospitality in the local bars and cafes.’’

VT’s latest survey showed a record 30 per cent of businesses expected employee growth and a growing number of Taranaki businesses ( 27 per cent) anticipate challenges in finding skilled staff.

It’s no surprise then, that other regions want to get in on the energy boom.

Hastings mayor Lawrence Yule said Hawke’s Bay wasn’t ‘‘booming and growing in terms of jobs’’. Instead, a lot of industries were trying to improve efficiency at the cost of new jobs.

He said improving employment would come down to attracting

new industries into the region –like oil and gas exploration.

‘‘We’ve been complacent for too long on the basis of what we grow on our soil. We do continually need to look for new things that can supplement both the tourism part and primary production part of our economy.’’

EVEN WITHIN rural areas, where primary industries are booming, there can be holes. In Southland, the dairy boom and other food production projects were offset by job losses at the Tiwai Point aluminium smelter.

Venture Southland enterprise and strategic projects group manager Steve Canny said economic variability meant there was a cautious approach toward employment but he was seeing signs of new investments in the region and there was likely to be, just as in Auckland and Canterbury, skills shortages. It’s a similar story in Waikato, where rural and manufacturing industries collide in a two-paced regional economy.

Drake International Hamilton branch manager Chris Haigh said her company did not have enough jobs for all inquiries in the unskilled labour market.

And, ‘‘ even though they say there’s a lot of people out there, it’s still challenging to find skilled labour in various areas, especially in engineering. ’’

Despite a gap between supply and demand for unskilled workers and the difficulty in finding skilled workers, Employers and Manufacturers Association chief executive Kim Campbell was looking forward to 2013 with ‘‘cautious optimism’’.

‘‘ What we’re seeing is, even though some rural areas are pretty gloomy – and despite the very difficult problems that the strong dollar is presenting – there is actually a surprising amount of confidence and we’re seeing quite a lot of employment growth in certain pockets,’’ he said, noting agricultural and innovation sectors.

‘‘Overall we’re looking forward to the year coming up as probably better than last year – and last year by no means was a disaster.’’

For Auckland Council chief economist Geoff Cooper, the success of the year ahead will be measured by how busy the City Mission gets over future Christ- mases. That depends on how well the city handles policy.

‘‘In the short term you’re looking at how to help businesses take on staff and invest more easily,’’ he says. ‘‘But in the long term from a council perspective we’re thinking about how to lift the overall competitiveness of firms – that’s things like providing good infrastruture, good transport, that over the long term are going to help us compete with the Sydneys and Melbournes.’’