Christina Leung: NZIER Principal Economist on the unemployment rate which is expected to rise

New data out this morning is expected to show more of us are out of a job. 

Stats NZ is releasing the latest unemployment rate at 10.45. 

Most economists expect it will rise from 4.6% in the June quarter to 5% in the September quarter. 

But NZIER Principal Economist Christina Leung told Mike Hosking she expects it will rise even higher. 

She says they believe the unemployment rate will peak at just under 6% towards the end of 2025. 

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Episode Transcript

Speaker 1 (00:00):
Jobs dart up today, most economists are picking between four
point nine and five point one increase in Principal economist
Christina Lyung is back. Well this Christina, good morning to you.
Whate a four point nine to five or five point one?
What's your care?

Speaker 2 (00:14):
We're expecting the unemployment rate to pick up to just
over five percent in the September quarter. So if we
look at other labor market indicators, they do point to
a further weakening in hiring. For example, our own ended
al quarterly Serve our Business Opinion shows that while firms
are starting to feel a bit more optimistic about general
economic conditions, certainly when it comes to hiring, there's still
quite a bit of caution out there. Over a third

(00:36):
of firms reduce heap count in the September quarter, and
then around nine percent are indicating that they plan to
reduce staff numbers in the next quarter.

Speaker 1 (00:44):
What's your pick for a peak and when?

Speaker 2 (00:48):
So, we do expect that the unemployment rate will peak
at just under six percent towards the end of next year.
It bears to remember that labor market does tend to
lag broader economic activity, and that reflects the fact that
firms when it comes to once they see that slowing
in economic activity. Generally, you do initially see some a

(01:12):
bit of labor hoarding going on, particularly where when we
look at the just how acute labor shortages have been
over the COVID nineteen pandemic period, firms are reluctant to
have to go through that again. So it's not until
there's actually quite a sustained slowing, which is what we've seen,
that firms do start to shed workers and hence you

(01:33):
get that slowing, broader slowing in the labor market.

Speaker 1 (01:36):
Are we seeing variability in the jobs, you know, geographically
and industry wise or sector wise.

Speaker 2 (01:43):
Yeah, So if we look at the slowing in terms
of the shedding of workers the labor market, where that
weakening is it is fairly brought based. Healthcare is one
area where there's been where it's been pretty resilient in
terms of jobs and for jobs. But when it comes
to for example, professional services and construction, there's been weakening

(02:05):
in those areas, and that reflects the impact the negative
impact of higher interest rates on demand. Now, higher interest
rates over the past year has reduced demand in a
lot of areas. For example, when it comes to construction,
it's made the feasibility of a lot of development projects
no longer feasible because of that high cost to borrow.
And generally, when you think about investment, it's the cost

(02:28):
of borrowing versus the return on investments. So the fact
that with higher interest rates it made it harder to
get a lot of those development projects off the ground.
We've seen that comes through in weakness and construction demand,
and then when it comes to professional services, that reflects
that broader US weakening in demand in the news and economy.

Speaker 1 (02:46):
Good stuff, Christin appreciate very much. Christina lung inst Ieer,
Principal Economists. For more from the Mic Asking Breakfast, listen
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