Mark Smith: ASB Senior Economist on the employment rate being expected to hit 5.3%

Last year's recession is still being felt in the job market. 

Stats NZ data —due out this morning— is expected to show unemployment reached a nine-year high of 5.3% in the June quarter. 

The economy's been back in growth since the latter part of last year. 

But ASB Senior Economist Mark Smith told Mike Hosking the economy has lost about 40,000 jobs since the late 2023 peak. 

More full-time roles have been lost than part time, he explained, and the labour market is getting that much weaker.  

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Episode Transcript

Speaker 1 (00:00):
So jobs day, hot money seems to be an increase
to five point three percent. Next question is that it
have we turned the corner Marksmith as ASB senior economists
back with us.

Speaker 2 (00:08):
Mark morning, Good morning mate.

Speaker 1 (00:10):
Are you at five point three?

Speaker 2 (00:12):
Yes, we are. Yeah, most of the market is at
the moment.

Speaker 1 (00:14):
And fire point three with a view to what for
the rest of the year trending down or we don't know.

Speaker 2 (00:19):
We don't know simply, but probably the risk is going
to go up for a while and it hopefully go down.
Probably The important thing to note though, is the economy
is lost in a net sense about forty thousand jobs
over the late twenty twenty three peak, and in terms
of the falls to jobs, it's been more for full
time rather than part time work. So really about labor market,
it's getting that much weaker.

Speaker 1 (00:40):
Yeah, can you put that in an historical context? I mean,
how often do we go around losing forty thousand jobs recently?

Speaker 2 (00:47):
Rare? Normally we do actually take on people. Now it's
pretty much the reverse is happening. In terms of the drives,
the New Zealand economy is not really copy much of
a break. We've been hit by a number of bad
news events and the accumulating at the moment, and what's
really happening is is the unemployment rate is, you know,
five point three percent the highest in twenty sixteen at

(01:09):
the world we've high over the next few months.

Speaker 1 (01:11):
Yeah, have you changed your view on that? Because it
was a while back a lot of us were saying
five to five and I but I can't remember who
it was, but somebody got towed dangerously towards six. Then
we all seem to amend ourselves while we thought that
twenty five was going to be this utopia, which it's
not turning out to be. So have you changed your view?

Speaker 2 (01:28):
I think we've changed our view in terms of how
how much the labor force is growing by now we
expect free essentially flat. I'd put that into context. The
labor market was growing without five percent a year a
couple of years ago, so it's very much the case
of much fewer people coming in. Migration is essentially slowed,
as well as the prospect to find a job as
much lower, so people are staying out of the labor market.

Speaker 1 (01:50):
If we get five to three today, with a broad
feeling that it might not be over yet, what's the
RB do.

Speaker 2 (01:57):
I think they'll they'll look at that certainly, but really
the thing for them or will be what's happening on
the pricing and cost sight of the economy in terms
of a higher unemployment rate. Well, that's what it really means.
There's lots of more spec capacity in the economy and
we're also seeing way to the labor cost growth slow.
We expect labor cost growth slow for the lowest in
four years. Now. What it really means is the Reserve

(02:20):
Bank would be more confident that inflation will converse to
two percent over next year.

Speaker 1 (02:25):
Yeah, Well, the problem is of the number of the
day is too inflation is higher than two that's, in
simple Layman's terms, we're going backwards.

Speaker 2 (02:32):
Well, I think what that is. Tried to look through this.
It's near term spike inflation. I think most people expect
inflations to take up to around three percent by the
second half of this year. But the real key thing is,
though there's a lot of specks the economy, wage growth
is low and as a result, we like to see
inflation cooled from around three percent by sort of later

(02:55):
this year to around two percent and the Reserve Bank
can look through the spike inflation, you cut the.

Speaker 1 (03:02):
Good insight mark, appreciate your expertise as always, make smith
out of the ASB a good This whole looking through thing,
I mean, the RB can look through whatever they like.
We don't look through the insurance bill or the rates
bill or the POB. Wouldn't it be nice if that
just turned up in the letterbox and go, oh no,
we'll look through that. Actually. For more from the Mic
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