Benefit numbers: Calm before storm
A reduction in growth in the number of people on jobseeker support is likely to be a ‘‘lull before a second wave’’ of job losses hits, economists say.
In the first full week of level 4 lockdown, an extra 8569 people signed up to the jobseeker support benefit, a growth of 9.6 per cent compared to the week before.
But by the week ending May 1, the rate of growth had slowed to 3.3 per cent.
‘‘The figures show that, although job losses are still mounting, the pace of layoffs has slowed,’’ said Infometrics economist Brad Olsen.
‘‘This trend very much looks like a lull before the storm, with a second wave of job losses expected when the wage subsidy comes to an end at the end of June.’’
Economist Shamubeel Eaqub said New Zealand had seen the first wave of Covid-19-driven unemployment, as people were laid off by businesses that did not claim the wage subsidy.
But as the cash from the wage subsidy ran out there would be another wave of redundancies, he said.
‘‘There was a big surge that’s started to fade away and there will be another spike, not quite as sharp, more a swell.’’
Progress would be more ‘‘stop start’’ than in a normal recession, he said, because of the big interventions from Government.
Some businesses would open again today and find their sales were not as high as they had been before the virus, he said. That would prompt them to adjust the size of their operations accordingly, and potentially lay off staff.
Olsen said he expected 5 per cent of New Zealand businesses would still not be able to operate at level 2, mostly those in tourism or the events sector.
‘‘Of course, businesses will still be working at a much reduced capacity, with additional requirements limiting the number of people who can be on site or interacting in close proximity. The increased requirements on businesses will simultaneously push up costs and limit revenue, but it’s a good start.
‘‘The key area of focus now is how spending patterns will change – if households and other businesses still keep a close eye on their spending, the economy will remain in a weaker state for longer. At level 2 the focus turns clearly on to demand and how people’s purchasing changes.’’
‘‘There will be another spike, not quite as sharp, more a swell.’’
Shamubeel Eaqub
Economist