The Canterbury rebuild has peaked, according to Westpac economists. About 14,000 construction jobs could be lost in Canterbury over the next few years. A plan is now needed to manage the impact of the downturn on Canterbury's construction employment and the wider regional economy. Business editor Dene Mackenzie reports.
Between them, Canterbury and Auckland have accounted for more than half of all consent activity in New Zealand since March 2012.
But for Canterbury, the boom in construction activity as a result of the earthquakes is reaching its peak.
Activity is expected to start falling from September next year as residential rebuild activity, in particular, falls sharply.
By 2022, the non-residential and non-building components of the work are expected to wrap up as well.
Westpac industry economist David Norman says this will mean a surplus of workers in Canterbury, which will create a risk of a downturn in the region.
Over the three years following the February 2011 earthquake, a total of 22,000 additional workers were employed in Canterbury.
Business demography data suggested about 14,000 of those (63%) were in the construction industry.
The size of that industry all but doubled, reaching about 30,000 workers, he said.
It was worth noting that before the earthquakes, employment in Canterbury construction was at its long-term level.
''This suggests as rebuild activity subsides, the jobs of 14,000 people who have been put to work rebuilding the region will be harder to maintain. Theoretically, by 2022, the jobs of all these workers may have disappeared.''
To many outsiders looking in, it might appear that despite the scale of those numbers, there was no need to worry. Just as the work rate ramped up in Canterbury, it could scale down, Mr Norman said.
Anecdotes abounded of thousands of people moving to the region from overseas and from the rest of New Zealand and those people could just as easily relocate back home or elsewhere after the rebuild.
The numbers told a different story. Pinpointing the origins of the new construction workers in Canterbury was challenging but Westpac could identify where the bigger pool of 22,000 new workers across all industries in Canterbury came from, he said.
Working back from there showed the vast majority appeared to have come from Canterbury itself, through increased labour participation, reduced unemployment and natural growth.
The Household Labour Force Survey data showed not only a massive reduction in the Canterbury unemployment rate since March 2011, but a large fall in the absolute number of unemployed people, Mr Norman said.
Between March 2011 and March 2014, the unemployment rate fell from 5.5% to 3.4%, even as it remained stickier at a national level - falling from 6.9% to 6.3%.
In absolute terms, unemployment fell by 6200.
In other words, all else held constant, 6200 people living in Canterbury who did not have jobs in March 2011 had found jobs by March 2014, accounting for 28% of all job growth in the region during that time, he said.
In percentage terms, the labour force participation rate grew slightly to 72.3% from 70% before the quakes.
But in absolute terms, the number of people joining the labour force grew significantly.
About 7600 people who were not in the labour force in March 2011 had joined it by 2014, accounting for 35% of all new workers in Canterbury.
Natural population growth accounted for about 3900 new workers in Canterbury as people reached working age and entered the workforce.
And in the three years to March 2014, net overseas migration into Canterbury was 3700, including the net outflow of 3600 in the nine months immediately after the February 2011 quake and a net inflow of 7300 in the 21 months following, Mr Norman said.
Immigration data suggested 2500 workers had arrived from overseas since 2011, or just 11% of all new jobs created in Canterbury since the quakes.
That left only a net 1800 workers, or 8%, of all new jobs coming from other parts of New Zealand, he said. Looking at construction activity and employment across New Zealand revealed there was low mobility of construction workers between regions.
Parts of the country with little construction growth, or even falls, still had employment growth rather than the fall in construction employment expected if workers went elsewhere.
''This data confirms the point relatively few of the new construction workers in Canterbury are likely to have come from elsewhere in New Zealand.
''We don't know with certainty what proportion of new construction workers in Canterbury came from outside the region, or how likely they are to leave again when the boom is over.''
But there were some assumptions that could be made, Mr Norman said.
They included:Canterbury had nearly 14,000 more construction workers now than it was likely to need after the rebuild.
A small proportion of those workers might relocate.
Even if it was assumed all 4300 migrants from outside Canterbury worked in construction and were able to relocate, that left 9400 workers without jobs.
A small number of the 14,000 might be able to shift back into other industries but, given the limited redeployment observed on the upside, that was not likely to be more than a few hundred.
That left about 9000 construction workers who would not have jobs as activity returned to longer-term averages and who were unlikely to relocate if current mobility trends continued, he said.
''This outcome will create significant downward pressure on Canterbury economic growth as several thousand income-earners lose their jobs.''
The good news, according to Mr Norman, was the Canterbury rebuild timeline was ''relatively clear''.
Unlike in most other instances, there was good visibility about what to expect in the next few years.
''This offers the rare opportunity to plan for the end of the boom, a gift that should not be undervalued. But plan we must, and quickly.''
At a glance
• Business planning: Canterbury construction-related businesses in particular need to plan now for how to deal with the slowdown.
• Diversification: Central and local government agencies need to work with local industries to encourage other inward investment and develop other industries.
