Unemployment set to spike near 10%: Finance Minister

Finance Minister Grant Robertson. Photo: ODT
Finance Minister Grant Robertson. Photo: ODT
The Minister of Finance is sounding a warning New Zealand is unlikely to escape global economic fallout from Covid-19, with unemployment numbers expected to swell close to 10 percent in coming months.

Grant Robertson today told Newstalk ZB's Mike Hosking yesterday's shock unemployment rate drop to 4 percent in the June was a "good result" but the next three months were expected to see the pendulum swing the other way.

"The economic hit of this crisis is going to be felt most acutely in the September quarter and obviously we'll see that data in a few months' time," said Robertson.

With the Government wage subsidy coming to an end on September 1, Treasury is forecasting unemployment to reach just under 10 percent in the next quarter.

Robertson said that despite the grim forecast New Zealand could be helped by having come out of lockdown quicker than originally expected and the current level of economic activity.

Asked what he thought it would ultimately reach Robertson replied: "I'm certainly working on not getting into double-digit areas.

"The issue we've got though is the rest of the world because while we've got things happening in our economy everybody can see the stories from overseas about things getting worse.

"That will ultimately have an impact on New Zealand so for now it's probably best to look just one quarter at a time and we're looking to keep under 10 percent for that September quarter."

Robertson today urged banks to keep helping customers through this difficult time saying through measures put in place by the Reserve Bank and government stimulus packages there was every reason for them to support viable businesses and households.

"It's important that they see this as a one-in-100-year event, recognise they've got strong support from the Reserve Bank and the Government and get alongside New Zealanders."

He said with the wage subsidy coming to an end in a few weeks' time, he was confident it was not finishing early. Targeted support remained in place with the income relief payment and business loans.

"The kind of package that we've put out amounts to all up around 20 percent of GDP so I feel like we're doing what we need to do alongside the Reserve Bank."

He conceded that come September 2 there could be some tough times ahead.

"It's certainly going to be difficult for some people who do end up losing their jobs when the wage subsidy extension ends but that won't be the case for every single person on the wage subsidy extension."

Many businesses were now operating well and some were even re-employing people they had earlier laid off during lockdown.

Comments

300,000 on the wage subsidy - that alone is 10% of the workforce. 10% + 4% = 14%, then there are the knock-on effects which means 14% is the low side. 10% is a politician's view of reality - the truth is somewhere else.

What goes unmentioned in their report are a number of factors encompassed by their “underutilization rate.” You see, the unemployment rate, as mentioned above, is dependent on the number of people in the labor force. The government is only counting people being “in the labor force” if they are actively seeking a job and reporting in to their employment services each week. During lockdown people could effectively do neither, so tens of thousands were simply removed from the labor force count. The government considers them “spare capacity in the labor market.” Also, even for those who are still able to do some work, the published rate doesn’t reflect how many people are working full time. The actual number of hours worked on average per week fell by more than 10% last quarter… the largest drop in that category for as long as they’ve been keeping such records. As the linked analysis shows, their underutilization rate rose to 12%, employment dropped by 11,000 jobs and more than 37,000 people “left the labor force.” So what was the actual unemployment rate for the quarter if it were measured in more normal western terms? Well into the double digits. Somebody is telling porkies!

Global impact. Challenging numbers is beside the point.

A reported rise in 'patriotism' is good; it's not nationalism.

Well, I would say that's a given. Oh well, just throw some more money at the problem - that'll fix it ha ha.

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