South Island employment confidence has taken a hit due to a variety of reasons, including the lower Fonterra payout and a perceived lack of job opportunities.
The Westpac McDermott Miller employment confidence index for the three months ended December showed New Zealanders became more pessimistic about the state of the labour market late last year.
The index fell from 11.5 to 106.5 in the December quarter, reflecting pessimism about the availability of jobs as well as reduced expectations for wage growth, Westpac senior economist Satish Ranchhod said.
''Looking at the news flow over the past few months, it's not hard to see why people could have become more nervous about the outlook.''
Late last year there was a further fall in some commodity prices and a downwards revision to Fonterra's payout forecast, he said.
That would be a significant drag on spending in rural communities over the coming year and current dry conditions in much of the country were not helping.
Consequently, it was not surprising to see sharp falls in employment confidence in dairying regions, especially Southland, Mr Ranchhod said.
Southland's index fell 14.8 points to 100.7 where above 100 indicates optimism and below 100 shows pessimism.
Otago was down 4.4 to 98.9 and Canterbury was down 8.5 to 114.4.
Nelson-Marlborough-Westland was the only South Island region to show an improvement, up 1.5 to 103.5.
Mr Ranchhod said employment confidence remained strongest in Canterbury, but even there confidence was down.
The relatively more upbeat outlook for Canterbury's labour market reflected reconstruction work helping support growth in employment and earnings.
Wellington and Auckland were the next most optimistic. Both regions were less exposed to recent falls in commodity prices, and expectations related to earnings and job security had been resilient, he said.
The regions with the lowest confidence were Otago and Gisborne-Hawkes Bay, and many workers in those regions noted concerns about the availability of job opportunities.
There was also a significant drop in expectations for earnings and job opportunities in Southland.
However, Westpac still had strong reasons to expect the New Zealand economy would continue growing at a solid pace in the coming year.
''This is because growth in New Zealand is increasingly being underpinned by domestic demand.''
In part, that was due to continuing reconstruction spending in Canterbury but construction demand was increasing more generally, Mr Ranchhod said.
There were also positive signs in terms of household spending as lower petrol prices left more money in consumer pockets.
Also, business investment and hiring intentions remained at high levels at the end of last year.
''In light of these favourable conditions, it would not be surprising to see sentiment around the labour market picking up again over 2015,'' he said.
