Caution over rise in job optimism

The South Island remains resolutely optimistic about employment prospects, despite a drop in the confidence of Canterbury.

Every region in the South Island is above the 100-point mark in the Westpac McDermott Miller employment Confidence Index, indicating there are more optimists than pessimists.

Otago had the largest lift in confidence in the three months ended December, up 8.1 points to 103.4.

Southland was up 4.8 points to 101.4, Canterbury was down 4.8 points to 103.7 and Nelson/Marlborough/Westland was up 1.2 points to 101.5.

In the North Island, Auckland was up 5.2 points to 105.9 and Taranaki/Manawatu/Wanganui was up 5.9 points to 101.8.

The rest of the North Island was below 100, despite a rise of 7.1 points in Northland and 6 points in Gisborne/Hawkes Bay.

The New Zealand index rose 2.2 points to 101.5 in the December quarter.

Westpac senior economist Anne Bonniface said New Zealanders had become more upbeat about employment conditions, particularly their own job security and earnings growth prospects.

But she warned against getting too carried away by the positive result.

"While there has been a broad-based improvement in confidence this quarter, the overall level of confidence remains well down from those we saw in 2014, indicating workers have not entirely stopped fretting about employment conditions.''

The move lower in confidence in 2015 had coincided with a drift higher in the unemployment rate, which reached 6% in the September quarter.

The trend of rising unemployment was likely to continue in the year ahead, with the unemployment rate eventually expected to peak at about 6.5%, Ms Bonniface said.

The Westpac outlook for the broader economy still supported that view, but the lift in employment confidence in the latest quarter would cause some thought about the speed with which the peak might occur.

The biggest driver of the lift in employment confidence was an improvement in the employment expectations index.

Workers became noticeably more upbeat about both the potential for future earnings growth and their own job security, she said.

However, the bounce in expected earnings came after the series hit rock bottom last quarter.

The number of people expecting to earn more this time next year was still at its second-lowest level since the survey began in 2004.

"It's not hard to see why so few workers are expecting a fatter pay packet over the next year. Unemployment rose steadily over the course of 2015, and at the same time, inflation remained below 1%. Add the two together and the chips looked to be stacked firmly in favour of employers at the negotiating table.''

If the Westpac view of economic growth set to slow noticeably this year was added to the mix, it was not difficult to understand why workers remained relatively cautious, Ms Bonniface said.

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