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22 December 2011
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Unemployment

December 2011

Internationally the continued high level of unemployment despite economic recovery is of concern. Unemployment is detrimental to and imposes many costs on the individual, the economy and society. Unemployment has proved intractable since the global recession. The more entrenched it becomes the more damaging it will be. Social divisions and conflict will be sharpened. It will become increasingly difficult to integrate those whose work experience is minimal or to reintegrate those who have experienced a long period out of work. The mismatch or gap between experience and skills held and those required will widen.

New Zealand, compared to other OECD countries, has a below average rate of unemployment overall and low long-term unemployment but a slightly above average youth unemployment rate.

The official measure of unemployment comes from the Household Labour Force Survey (HLFS), which provides a comprehensive understanding of participation in the labour market. The unemployed are defined as those actively seeking and available for one hour or more of work per week. Other more limited statistics are available to measure unemployment – the numbers of registered job-seekers and those receiving the unemployment benefit.

In the last year unemployment as measured by the HLFS has shown these characteristics:

  • Having increased during 2008-9, the overall rate has flattened at around 6.5 percent
  • The number of long-term unemployed (more than 26 weeks) is gradually increasing, hovering close to 30 percent of the unemployed
  • The youth unemployment rate (15-19 years) remains high at close to 25 percent; the gap between this rate and the overall rate has widened during the recession
  • Maori and Pasifika unemployment has remained high at between 13-15 percent since 2009

Unemployment, 2000-2011

Source: HLFS

Youth unemployment

Youth unemployment remains of concern. A disturbingly large number of young people are not in education and are not engaged with the labour market. The statistical category of ‘NEET’ (Not in Employment, Education or Training), drawn from the HLFS, measures this phenomenon. It includes both the unemployed and those outside the labour market who are not studying. The recent revision of this statistic by Statistics New Zealand has included caregiving not in the labour force in NEET.

The NEET rate has grown in recent years and is at a relatively high level internationally. The rate is substantially higher for 20-24 year-olds than 15-19 year-olds. Current rates (September 2011): 15-19 year-olds 8.4 percent; 20-24 year-olds 16.0 percent. The annual cyclical pattern is likely to produce higher rates again in the next year.

Youth NEET, 2004-2011 (percentage of age group)

Source: HLFS, seasonally adjusted

Looking to the future

Since the latter part of 2009 unemployment has stabilised. However, with a lengthening of the duration of unemployment, persistent high youth unemployment and many youth not engaged with the labour market, unemployment policy remains salient, particularly if a ‘jobless’ recovery threatens in which economic growth is not accompanied by employment expansion. The Department of Labour’s lead employment indicator fell slightly in September 2011 after increasing for nearly two years. While the expectation was still for moderate employment growth in the short-term, another fall in December 2011 could indicate a downturn in employment for 2012.

Treasury and the Reserve Bank forecast unemployment to decline somewhat from the current level of around 6.5 percent. The Reserve Bank also notes a current possible jobs/skills mismatch between the relatively high, stable unemployment rate and the tight labour market for skilled labour. The Department of Labour forecasts about 200,000 jobs will be created, 2010-15, about 1.8 percent per annum. Growth is expected across the range of skills during this period but a central issue will be the gap between skills required and those held by the unemployed.

Dr John E. Martin, Research Services Analyst

Disclaimer. Every effort has been made to ensure that the content of this briefing paper is accurate, but no guarantee of accuracy can be given.
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