Benefit numbers soar

More people are on the Jobseeker benefit than at the height of the global financial crisis (GFC), and it’s going to get worse, one economist warns.

There are now 35.2 people on the Jobseeker benefit per 1000 compared to 34.6 at the peak of the GFC, or a total of 174,630.

Economist Shamubeel Eaqub said the potential impact of the Covid-19 pandemic on the workforce was concerning.

‘‘We usually count unemployment in tens of thousands but I think we will count it in hundreds of thousands. But it’s very hard to tell how big it’s going to be.’’

There would be three waves of redundancies, he said. The first was hitting now, as people were being laid off by businesses

that did not expect to survive in the short term.

The second would be when the wage subsidy expired and businesses that had hoped to make it through realised they had to cut costs.

The third would be when the effect of a global recession hit New Zealand’s economy.

The Government has waived the standdown period for the Jobseeker benefit to help people who are suddenly out of work due to the impact of Covid-19.

Eaqub said an additional 200,000 out of work was a conservative estimate.

‘‘I’m not expecting any recovery until 2021. It’s hard to see how this is going to get better quickly. ‘‘

He said the next couple of weeks would be critical as it became apparent what sort of level of activity New Zealand would stabilise at post-lockdown – whether that was a similar level to before or well below. China had returned from lockdown with activity 10 per cent down, he said.

Westpac chief economist Dominick Stephens said on Tuesday unemployment would peak at 9.5 per cent before a slow return to 5 per cent.

Brad Olsen, economist at Infometrics, expected unemployment to rise ‘‘considerably’’ in the coming months.

‘‘At present, 59 per cent of the labour force is being supported by the wage subsidy, and I’d expect that a number of businesses won’t remain viable as the impacts of Covid-19 continue to upend the business world.’’

Olsen said about 74 per cent of the workforce was operating at level three. About half the working age population was being supported through the benefit or wage subsidy, he said.

‘‘There are still a number of businesses whose ability to survive will be an ongoing struggle.

‘‘Double-digit unemployment now seems inevitable but two questions remain: First, how much worse could it be but, more importantly, how long will the unemployment rate stay high?’’

Government plans for retraining those out of work would be vital to get the economy moving, Olsen said.

‘‘Double-digit unemployment now seems inevitable.’’

Brad Olsen

economist at Infometrics