Nick Tuffley: ASB Chief Economist ahead of the latest unemployment figures

New data out this morning is expected to show the job market has caught up with the economy. 

Stats NZ is releasing the latest unemployment rate at 10.45. 

Economists believe it will rise from 4.6% in the June quarter to about 5% in the September quarter. 

ASB Chief Economist Nick Tuffley told Ryan Bridge that until now, employment has been holding up in spite of the economic downturn. 

He says that situation now appears to have changed. 

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Episode Transcript

Speaker 1 (00:00):
The unemployment numbers out this morning for quarter three, currently
sitting at four point six percent, but most economists expecting
it to rise to five percent, which would make it
the highest since twenty twenty. We also have new household
living cost numbers out yesterday, which we'll talk about shortly.
Nick Toughley is the TIEF economist at ASB Bank. Nick,
good morning, Good morning, Great to have you on the show.

(00:20):
So what do you reckon? What's the number we're looking
for today?

Speaker 2 (00:24):
We do think we're going to see employment itself look
less resilient than what it has been and actually fall
about half a percent over this quarter. Now it may
surprise you, but so far during this downturn, employments actually
held up and kept growing even if it's slowed to
a core. But things look like they have changed, and
as a result, we're expecting a more noticeable jump and

(00:46):
unemployment to around five point one percent, and there reserve
banks expecting something closer to the around five percent as well.

Speaker 1 (00:53):
Does that where do you expect it to peak? Because
there was talked midnext year it'd be five point five percent.
Now I'm hearing some people will say six.

Speaker 2 (01:02):
We're expecting it will peak a bit over five and
a half percent, but somewhere around that five and a
half six percent range looks about reasonable at this point.
That would still mean it's a lower peak than what
we saw after the global financial crisis, when it was
about six and a half percent and we saw much
larger outright declines and employment.

Speaker 1 (01:22):
Okay, so things will still get worse. This is not
our worst number today.

Speaker 2 (01:27):
This probably hopefully this will be the last of a
big four. We do think though, that employment does risk
declining towards the end of this year, and we do
have a likely contraction and GDP to come through. But
this is starting to look in the rear vision mirror,
and as we're heading into twenty twenty five, we do
think we'll see growth starting to pick up. So those

(01:49):
green shoots that people have been talking about should be
starting to become noticeable.

Speaker 1 (01:53):
All right, what number does the Reserve Bank need? They
were predicting five percent for unemployment today, would you know
five percent mean? And I know it's not the simple,
I'll caveat that nick, but would five percent mean of
fifty basis points? You know, would more than five percent mean?
More likely seventy five would less than five percent? Mean
twenty five.

Speaker 2 (02:15):
I think if it's somewhere around five percent, give or take,
the Reserve Bank should continue to move at a fifty
point pace at this next meeting. There's a lot of
stuff in there. There's also what's happening with the wage growth,
what is happening with employment itself, That will matter as well.
But I think we're going to need to see substantially
weaker figures. And when I'm saying I'm not, you know,

(02:36):
you're talking about some quite material misses compared to what
Reserve Bank's expecting. For them to move by a larger amount.
Never say never, but I think the Reserve Bank would
be I think fairly comfortable move by fifty basis points
and then slow things down of it next year.

Speaker 1 (02:53):
All right, Nick, thank you very much for that. We'll
look at the wage growth numbers shortly. Nick Touughley, chief
economist at ASP Bank. For more from earlier edition with
Ryan Bridge, listen live to Newstalk SETB from five am weekdays,
or follow the podcast on iHeartRadio.