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Labour Market Statistics: June 2016 quarter (includes Household Labour Force Survey)
Embargoed until 10:45am  –  17 August 2016
Commentary

Household Labour Force Survey (HLFS) redeveloped

The June 2016 release includes results of the redeveloped HLFS, which was in the field for the first time this quarter. 

Improving labour market statistics has more information about the HLFS redevelopment. Please note that revisions to key labour market indicators (including the unemployment rate) were earlier communicated on 29 June, and these revisions are now included in this release.

This information release includes labour market statistics from the Quarterly Employment Survey and the Labour Cost Index that were previously released on 3 August 2016.

Overview of the labour market in the June 2016 quarter

Unemployment down slightly

The seasonally adjusted unemployment rate decreased to 5.1 percent in the June 2016 quarter (from a revised 5.2 percent in the March 2016 quarter). There were 1,000 fewer people unemployed over the June quarter, down to 131,000.

In seasonally adjusted terms, there were 2,000 fewer women unemployed in the June 2016 quarter. Their unemployment rate decreased 0.3 percentage points to 5.4 percent. The unemployment rate for men decreased 0.1 percentage point, down to 4.7 percent.

Graph, Labour market diagram June 2016

Employment

The June 2016 quarter estimates suggest employment growth of 2.4 percent (58,000 people), and that the employment rate has reached 66.2 percent. However, some of the changes to the redeveloped HLFS need to be considered when interpreting this quarter’s results. Overall, the new survey appears to be estimating a higher level (or stock) of employment than the previous HLFS.

Although we have backdated some changes to the questionnaire for certain estimates, in particular the unemployment rate, it was not possible to apply the changes in employment measures to historical data. The changes in the questionnaire for employment therefore result in a methodological break in the series between March 2016 and June 2016.

See Improving labour market statistics.

Changes that had an effect on the June 2016 quarter’s employment estimates are:

  • improved questions about undertaking paid work, which are now identifying more self-employed people in the labour market
  • including people employed in the armed forces and residing in private dwellings in the survey population.

Understanding the increase in employment

The change in employment this quarter is influenced by both changes to the survey and by real increases in the number of people employed. The improvements to the employment status questions in the questionnaire were made to correct an issue in the former questionnaire, which probably over-estimated the number of paid-employees and underestimated employers and 'self-employed without employees'. 

See employment status for more detail on these changes.

Graph, Employment status in main job

The graph above shows employment status in main job. It highlights an atypical increase in some of the employment status categories. Employers and the 'self-employed without employees' rose 62,500 and 32,000, respectively, from the March to June 2016 quarters. This was partly offset by a drop in the number of paid employees, down 45,400 over the quarter. On an unadjusted basis total employment had a net increase of 45,300 people.

While it is not possible to understand at an individual level how the questionnaire changes have altered the way questions are answered, our testing and monitoring has shown the new questions are performing as expected. There are considerable flows of people from being paid employees to being employers, bringing the HLFS estimates more in line with other data sources. This is a one-off adjustment, which has shifted a number of people to a more-correct employment status. In most instances these classification changes simply move people within the overall 'employed' category. However, evidence suggests some people have also been identified as self-employed (without employees) who were previously counted in the not in the labour force category.

Evidence for employment growth over the quarter

While the magnitude of the changes due to new questions and any real changes in employment status cannot be quantified, other labour market indicators suggest there was real growth in employment in the June 2016 quarter.

In previous quarters employment growth has been equal to or has exceeded growth in the working-age population, with a few exceptions, for the last three years.

Latest National Population Estimates show the largest-ever population increase was for the year ended June 2016. We would expect this population growth to be reflected in the employment growth this quarter.

Although the coverage of the Quarterly Employment Survey (QES) varies from the HLFS, the QES seasonally adjusted figures show the number of filled jobs increased 3.1 percent over the year to the June 2016 quarter. This compares with a 1.9 percent increase in the year to June 2015.

The following industries made the largest contribution to the increase in filled jobs in the QES for the year to June 2016 (not seasonally adjusted):

  • accommodation and food services (up 14,000 jobs, 11.0 percent)
  • construction (up 10,000 jobs, 6.8 percent)
  • health care and social assistance (up 9,100 jobs, 4.1 percent)
  • professional, scientific, technical, administrative, and support services (up 9,100 jobs, 3.6 percent).

We also have a monthly filled-jobs series based on tax data. This covers all jobs belonging to workers who were paid wages or salaries at any point in the month and uses data from the Employers Monthly Schedule tax form. The latest estimates from this series show a 3.1 percent increase in filled jobs between April 2015 and April 2016.

See Experimental monthly filled-job series for more information.

Looking at the impact of the survey change

Self-employment

The effect of changes to the employment status questions is to reclassify some people previously identified as not in the labour force to self-employed. We expect this is largely due to moving away from the question "did you do any work for pay or profit in a job, business or farm?". This resulted in an increase in the number of employed and a corresponding decrease in the number of people not in the labour force.

To dig deeper into this change, we look at some changes in employment status between quarters for individuals in the survey. Households remain in the survey for eight consecutive quarters, therefore we can see the employment status of people who responded in both the March and June 2016 quarters. From this, we saw an increase in the proportion of people who were not in the labour force in the March quarter who were now identified as self-employed.

New information on job tenure suggests these people have been self-employed for some time, which confirms the issues in the previous questionnaire. This strongly indicates the questionnaire change has improved the identification of self-employed people.

Defence force included

A change in the population of the HLFS is contributing to the increase in employment. We have added in members of the armed forces living in private dwellings who were previously excluded. This has added 7,000 to 10,000 people to the total number of people employed.

See Datainfo+ for more information on this improvement.

The effect on estimates following the change in the population is noticeable when looking at employment estimates broken down by industry and region. The public safety and administration industry, which includes the defence force, had a significant increase in people employed in the June 2016 quarter, as did the Manawatu-Wanganui region, where some survey collection took place near and around the Linton army camp. This means the movements for this industry and region should be treated with caution this quarter.

Seasonal adjustment

The changes made to the survey have the potential to affect the seasonal pattern observed in the employment estimates. We considered several options for how to account for any discontinuities arising from survey changes.

We decided not to intervene in the seasonal adjustment process this quarter, due to needing more than one quarter’s data to be available to estimate the new seasonal pattern.

See Datainfo+ for more information.

Managing the impact of the change

Following consultation with our customers we have introduced all the survey changes associated with our development plan this quarter rather than phasing them in over several quarters. This means that future quarterly movements will not be affected by survey changes and should be able to be used with confidence. We will continue to monitor the estimates for any indication of residual effects from the redevelopment.

Underutilisation

This quarter we introduced a new labour market measure – a measure of the underutilisation of labour in New Zealand. This measure is useful to indicate the potential labour supply. This measure includes: people who are unemployed by the official definition, people who are employed but want to work more hours (underemployed), and those who want a job but are not currently actively looking or available to start work. A total of 342,000 people were underutilised in the June 2016 quarter, which equates to an underutilisation rate of 12.7 percent.

See Underutilisation in the labour market June 2016 quarter results for more information.

Unemployment down in North Island

The Auckland, Gisborne/Hawke’s Bay, and Taranaki regions had statistically significant decreases in the unadjusted unemployment rate over the year to June 2016. The Auckland region had a decrease of 1.2 percentage points, bringing the unemployment rate down to 4.7 percent, the lowest since September 2008.

Graph, Unemployment rates by regional council area 

New Zealand’s OECD rankings

With the seasonally adjusted unemployment rate at 5.1 percent, New Zealand is 11th equal in the OECD rankings (no change from the March 2016 quarter). This ranks New Zealand below the United States and the United Kingdom (both with unemployment rates of 4.9 percent) but above Australia (5.8 percent).

Not in employment, education, or training (NEET)

The seasonally adjusted NEET (not in employment, education, or training) rate decreased 1.7 percentage points, to 10.7 percent in the June 2016 quarter. This was the lowest NEET rate since September 2008.

Graph, Seasonally adjusted NEET aged 15–24 years

Changes in the number of youth NEET in the latest quarter should be interpreted with caution, due to the redeveloped HLFS. The changes outlined above – better identification of self-employed people and including defence force personnel – are relevant for NEET because this could result in more youth being counted as employed. This is more likely to be the case for youth aged 20–24, not those aged 15–19 years old. Compared with the June 2015 quarter, the only statistically significant change was an increase in the number of males aged 20–24 years who were employed and not in education.

In addition to this, the new HLFS questions have been improved to better identify education and caregiving status. It is not possible to yet determine whether this has had a material effect on the NEET estimates. 

The following sections were published on Wednesday 3 August.

Wage growth remains subdued

All the following movements are for the year to the June 2016 quarter.

The labour cost index (LCI) (including overtime) increased 1.5 percent. This measure of wage inflation reflects changes in the rates that employers pay to have the same job done to the same standard. Annual LCI increases have been 1.5 percent to 1.8 percent since the March 2013 quarter.

Private sector annual wage growth, as measured in the LCI, increased 1.6 percent. Public sector annual wage growth increased 1.3 percent. The latest annual growth in the public sector came from increases in central government (up 1.3 percent) and local government (up 1.7 percent).

The unadjusted LCI increased 2.8 percent. This measure allows for quality changes within occupations as well as wage inflation.

Average ordinary-time hourly earnings, from the QES, increased 2.1 percent in the year ended June 2016 – to reach $29.62. This measures the average hourly wage bill across all jobs in surveyed industries.

 

 In the year to the June 2016 quarter, prices of goods and services bought by households, as measured by the consumer price index (CPI), increased 0.4 percent. The LCI (including overtime) increased 1.5 percent over the same period. The gap between CPI and LCI inflation (1.1 percentage points) is the smallest since December 2014 (1.0 percentage points).

Minimum wage change affects wages

The adult minimum wage increased from $14.75 an hour to $15.25 an hour (3.4 percent increase) on 1 April 2016. For the June 2016 quarter, 14 percent of all surveyed salary and ordinary time wage rates increased – 2 percent of rates increased due to the minimum wage increase. The impact of this change is most noticeable in the retail trade and accommodation industry group, and for jobs requiring little or no training and experience.

See Datainfo+ for more information on the impact of the minimum wage change.

Growth in weekly earnings down on previous quarters

The ordinary time average weekly earnings per full-time equivalent employee (FTE), as measured in the QES, increased 2.0 percent over the year to June 2016 – to reach $1,119.02. This increase was due to the increase in wages, as opposed to the increase in hours, as the average weekly ordinary paid hours decreased 0.1 percent. Ordinary time average weekly earnings per FTE had increased 3.2 percent over the previous year to June 2015.

Over the year to June 2016, ordinary time average weekly earnings per FTE in the private sector increased 2.3 percent. The public sector had a slower wage growth of 1.7 percent.

The construction industry, and the professional, scientific, and technical services industry, made the largest contributions to the increase in average total weekly earnings per FTE. Wholesale trade and retail trade were the next-largest contributors.

Wage growth in construction industry eases

In the year to the June 2016 quarter, salary and wage rate growth (including overtime) in the Canterbury construction industry continued to ease. The 1.0 percent growth was the lowest annual increase since the series began in 2010.

Compared with the June 2009 quarter, construction wages in Canterbury, influenced by the rebuild following the earthquakes, have increased more than in the rest of New Zealand. However, since the March 2015 quarter, annual wage growth has been stronger in the rest of New Zealand than in Canterbury. 

For the rest of New Zealand, wage rate growth in the construction industry fell slightly for the year, to 2.1 percent.

The annual mean increases of the wage rates that rose for the June 2016 quarter were:

  • 3.3 percent for the Canterbury region
  • 4.0 percent for the rest of New Zealand.

In the June 2016 quarter, the annual mean increases in Canterbury construction wage rates were lower than the mean increases for the rest of New Zealand for the third quarter in a row.

 For more detailed data about labour market statistics, see the Excel tables in the 'Downloads' box.

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