Subsidy hid true state of job market

More than 60 per cent more people are now receiving Jobseeker Support work-ready benefits than the same time a year ago – and the number of people aged under 24 on the benefit has leapt 80 per cent.

The Ministry of Business, Innovation and Employment has detailed the increase in its quarterly labour market report for June.

It said while the number of people employed did not increase dramatically in the June quarter, the labour market was showing strain. More people were underemployed and there was a fall in labour market participation.

To be classified as unemployed, a person must be actively seeking work, which many found difficult due to the lockdown.

The underutilisation rate rose to 12 per cent in the June quarter, up from 10.4 per cent the previous quarter. This is the largest quarterly rise since the series began in 2004.

For women, the underutilisation rate rose to 14.9 per cent, up from 12.7 per cent. For men, the underutilisation rate rose to 9.4 per cent from 8.3 per cent.

Salary and wage rates rose by 0.2 per cent over the quarter. This increase was driven by the minimum wage increase in April but was the lowest quarterly rise since December 1994.

MBIE said unemployed people were now more likely to move to the ‘‘potential labour force’’ or to be classified as ‘‘not in the labour force’’ than they were before Covid. Underemployed people were less likely to gain full employment and people in the potential labour force were less likely to enter the labour force.

ANZ chief economist Sharon Zollner said she expected the labour market to continue to deteriorate. Applications are now closed for all three tranches of the wage subsidy scheme, which she said had been so large and generous that it had ‘‘completely masked’’ the true state of the labour market.

ANZ still expects unemployment to peak just under 10 per cent. A bounce in economic activity after the lockdown was based on unsustainable fiscal stimulus, she said.

That was being removed, the lack of international tourists would be felt over summer and migration had dwindled to zero – all of which meant the labour market was not in the clear yet, she said.

As at July 24, 1.65 million jobs had been covered by the original wage subsidy scheme, and 450,000 by the extension scheme. Some jobs will have been covered by both schemes.