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Building a story of Canterbury employment

This article offers advice to technical users of labour market data on how to interpret recent trends in our published Canterbury data. We take a specific look at the recovery in the construction industry and show how to view the seemingly contrary stories about the pace of this recovery (figure 1).  

When we look at the strength of this recovery, we run up against contrasting results between the measures. This is caused by differences in the design and coverage of our measures. Analysing Canterbury’s regional performance can be difficult due to the limitations surrounding regional measurements. The indicators used in this article are not designed to give regional estimates and therefore movements should be treated as indicative. We also contrast the pace of the recovery in Canterbury construction employment data against other indicators of construction activity.

This article shows that:

This labour market data includes the Household Labour Force Survey (HLFS), Quarterly Employment Survey (QES), Labour Cost Index (LCI), and Linked Employer-Employee Data (LEED). Explaining labour market statistics has more information on these indicators. These figures are not seasonally adjusted unless otherwise stated.

Figure 1

 Graph, Annual percentage change in employment in Canterbury, Quarterly

Filled jobs rise in Canterbury with rebuild bringing more than just construction jobs

Filled jobs in the Canterbury region rose by 7.3 percent over the year to September 2013, according to the QES. Job growth mainly came from these industries:

  • construction
  • manufacturing
  • health care and social assistance.

Filled jobs in the September 2013 quarter reached their highest levels in the history of the series. This surpasses the previous peak in December 2007, before the impact of the recession.

This growth in employment supported in LEED data

LEED also showed signs of employment growth in Canterbury. The latest available data shows the number of filled jobs in Canterbury rose 2.1 percent over the year to June 2012.

The construction industry in Canterbury contributed to the majority of this growth, growing by a quarter over the same time period (figure 2). There were also signs of growth in professional, scientific, and technical services, reflecting the demand for architectural and engineering services to help the rebuild.

Figure 2

 Graph, Number of filled jobs in Canterbury, Construction industry, Quarterly

 
Figure 3 shows there was greater job growth in the construction services sub-industry rather than building construction, which is the sub-industry responsible for building work. Construction services could be associated more with the repair side of the rebuild. This sub-industry includes plastering and ceiling services, site preparation services (which includes demolition), and plumbing and electrical services.

LEED is compiled quarterly using administrative tax data and gives a degree of confidence in industry breakdowns not available in the survey measures (and in particular, regional industry data). It comprises all employees who paid tax during the quarter.

Figure 3

 Graph, Canterbury construction sub-industries, LEED data, Quarterly

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Strength in rebuild might be overstated in the QES and LEED, while understated in the HLFS

The broader measure of employment, the HLFS, shows a similar story in the Canterbury region. The HLFS also shows an improving Canterbury labour market, with employment growth of 2.0 percent in the September 2013 year. The HLFS found similar movements by industry, with the retail trade, accommodation, and food services industry group and the construction industry being the main contributors to employment growth.

If we construct an HLFS series that is broadly comparable with QES filled jobs, this HLFS comparable series for the Canterbury region reports growth of approximately 5 percent for the September 2013 year. This generally aligns with the QES. Over the same period, if we break down the analysis to the Canterbury construction industry, there is considerably stronger growth of approximately 13 percent.

Given that the QES and HLFS are sample surveys, estimates will be subject to sampling error. As such, small differences between movements should not be over-interpreted.

However, the HLFS hasn’t shown as pronounced growth as the QES partially due to conceptual differences between the two surveys. QES filled jobs and HLFS employed are both proxies for employment but, in essence, what they measure is different. However, some differences remain that are relevant for interpreting discrepancies between the measures.

Differences between the HLFS and QES and LEED

Both measures indicate employment recovery in Canterbury. However, when looking at these measures there is the possibility that the QES and LEED may overestimate growth in jobs while the HLFS may underestimate employment growth.

The HLFS captures a broader range of employment types. This means that in the HLFS a person may move from being self-employed to an employee, with no associated change in overall employment. However, this person will now fall within scope of the QES and LEED and be captured as a filled job. This can lead to the QES and LEED overstating job growth. As about 1 in 5 construction workers are self-employed, this could represent a large problem for the QES. However, we are unable to measure how many people move from self-employment to an employee.

There has also been a fall in employment in the agricultural industry in Canterbury. As agriculture is excluded from the QES, this is not reflected in filled-jobs estimates.

The QES includes all employees on a firm’s payroll. This can include workers from overseas who are staying in New Zealand for less than a year. These people are not measured by the HLFS. As such, some of the strength in the QES relative to the HLFS could result from the arrival of such workers.

Another possible weakness of the HLFS is a possible increase in people residing in temporary accommodation. These people will be captured in the QES but may not be fully reflected in the HLFS. This issue is dealt with in more detail in Ongoing impact of Canterbury earthquakes on the Household Labour Force Survey.

The regional allocation of employees in the HLFS is also based on where your household is located, not where you work. Therefore, any worker who flies down to Canterbury to work for the week will not be considered employed in Canterbury but in the region where their household is located.

The HLFS, on the other hand, includes agricultural workers, the self-employed, and people doing unpaid work; all of which would not fall under the QES.

topHLFS shows growth in the professionals, and technical and trades workers occupations, as well as youth employment

The HLFS provides valuable information on both occupation and age of the workforce in Canterbury. The rebuild has been good for youth (those aged 15–24 years), with employment growth of 12.1 percent for the September 2013 year.

Similarly, there was considerable growth in the technicians and trades workers occupation over the year (up 15 percent). The managers occupation saw a slight increase (up 3.2 percent). This occupation includes roles related to construction such as project builder and construction project manager.

Over the September 2013 year, the professionals occupation (up 4.9 percent) also saw a rise but is still slightly below pre-earthquake levels.

Hours recovering from quake-induced slump

Both the QES and HLFS produce hours measures which can be used as an indicator of labour resource use and economic activity in the Canterbury region.

Over the September 2013 year, the QES showed that businesses paid for 9.4 percent more hours, which was greater than the movement in filled jobs. As measured by the HLFS, the usual hours that people work per week, which aligns most closely to QES paid hours, rose by 4.2 percent. The actual hours worked rose by 5.4 percent.

The HLFS measures showed a gradual improvement following a dip after the February 2011 earthquake and have almost recovered to pre-earthquake levels. The QES paid hours, however, have shown a sharper incline back to above pre-earthquake levels.

topRebuild is putting pressure on construction wages

The LCI shows there was wage pressure in the Canterbury construction sector. The QES also indicated that wages in the Canterbury region were growing faster than those nationally.

The LCI showed the Canterbury construction industry salary and wage rates (including overtime) increased 3.7 percent for the year to September 2013. This compares with the 1.6 percent seen in the rest of New Zealand (figure 4). This means that businesses are paying more to retain the same quality and quantity of work in both Canterbury and the rest of New Zealand. However, in Canterbury businesses are having to pay more at a greater rate than in the rest of New Zealand. This change was seen in the QES with average ordinary time hourly earnings in construction rising 5.6 percent nationally.

Figure 4

Graph, All salary and wages rates for construction industry, percentage change same quarter of previous year, LCI data 

Figure 5 shows average ordinary time hourly earnings in Canterbury for all industries, as measured by the QES, have risen at a slightly higher rate than nationally (2.9 percent compared with 2.6 percent).

The QES figures immediately after the earthquake were affected by the loss of accommodation and food services workers. As these tend to be lower-paid industries, fewer filled jobs in these industries push up the overall average wage growth.

The LCI and QES are complementary wage measures. The LCI is a measure of wage inflation and reflects changes in the rates that employers pay to have the same job done to the same standard. The QES average earnings figures are aggregated payrolls from firms divided by the total number of hours paid.

Figure 5
 Graph, Average orindary time hourly earnings, Percentage change from same quarter of previous year, QES data

topConstruction activity is gaining pace

We’ve seen building work gather pace when we look at the value of building work put in place and ready-mixed concrete production, and this looks set to continue as the number of building consents issued pick up.

Building consents issued is a good indicator of future construction activity, and the value of consents has been steadily rising in Canterbury over the past few years. The value of consents issued for all buildings in Canterbury has more than doubled in current prices in the last two years. The value of all consented building work increased 73 percent in the year ended September 2012, then grew a further 41 percent in the year ended September 2013 year.

A good indicator of labour market activity in the building industry is the Value of Building Work Put in Place (WPIP). WPIP measures building activity for work that requires a building consent. Most non-building construction work, such as roads and infrastructure, does not need a building consent and is not included in WPIP.

The Value of Building Work Put in Place: June 2013 quarter showed a slight dip in the seasonally adjusted value of work put in place for Canterbury (in current prices). However, this followed a strong surge in the March 2013 quarter when the value of all building activity increased by 18 percent. For the last two years, the trend for all building work put in place in Canterbury has been increasing and it has reached double the most recent low point in June 2011. This is shown in figure 6.

Figure 6

Graph, All building work put in place, Trend values, Base: June 2007 quarter (=1000)

topConstruction activity not restricted to just building work

However, we need to keep in mind there is a lot of construction activity currently underway in Canterbury that does not fall within the scope of the WPIP indicator.

Construction-related activity that is not captured by WPIP (either partially or fully) includes:

  • work on important infrastructure such as roads, water supply, wastewater reticulation, and stormwater reticulation. These are big projects that are vital to the rebuild that contribute significantly to activity and employment in the Canterbury region.
  • basic repair work that is not consented
  • demolition work.

Major infrastructure projects are captured in our gross domestic product (GDP) estimates of ‘investment in other construction’ (figure 7). Infrastructure projects in Canterbury will be captured in ‘other construction’ but it is difficult to conclude that Canterbury drives national movements in specific quarters. This is because quarterly GDP is compiled at a national level and doesn’t have a regional dimension. ‘Other construction’ also tends to be a volatile series.

Figure 7

 Graph, Investment in other construction, Quarterly change in seasonally adjusted series in GDP, June 2008-13
Another example of work not captured in the WPIP is repair work that is doesn’t need a consent. In Canterbury this could include basic repair work such as plastering up walls in a residential home, painting and decorating, or tiling.

Repairs carried out on behalf of the Earthquake Commission are generally under $100,000 and almost none are consented. Fletcher Construction – Earthquake Recovery, which carries out the repair work, has made an estimated $1.5 billion worth of repairs as at 10 October 2013.

Production of ready-mixed concrete in both the Canterbury region and Christchurch metropolitan area has risen strongly since the March 2011 quarter. Production is now well above previous peaks seen in the 2006/07 housing boom. Enough ready-mixed concrete was produced in Canterbury in the year to the September 2013 quarter to fill 290 Olympic swimming pools (nearly 720,000 cubic metres).

topLabour market data indicates employment recovery in Canterbury

Our indicators show that the labour market in Canterbury is recovering. This recovery is being primarily driven by construction and activities related to construction. Although the recovery has come from construction activity, this activity has come from more than just the construction of new buildings. We saw:

  • employment and job growth
  • signs of pressure on wages
  • construction activity increasing in both consented building work and non-building work

Although our measures are not designed to give regional estimates, the results we have are indicative of recovery in the labour market and a pickup in activity centred on construction in Canterbury.

Where our employment data comes from

Data from the Quarterly Employment Survey (QES), Household Labour Force Survey (HLFS), and Linked Employer-Employee Data (LEED) all give us a window into what is happening with employment in Canterbury.

See Household Labour Force Survey – information releases.

See Quarterly Employment Survey – information releases.

See Linked Employer-Employee Data – information releases.

For more information contact:
Dan McKissack and Daniel Griffiths
Wellington: 04 931 4600
Email: info@stats.govt.nz

ISBN 978-0-478-40861-4 (online)

Published 22 November 2013

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