Michael Gordon: Westpac Senior Economist on the unemployment rate

Figures, due out this morning, are expected to show unemployment's hit a nine-year high. 

Stats NZ is releasing its latest unemployment update at 10.45am. 

Economists expect the rate to have reached 5.3% in the June quarter, up from 5.1% for the March quarter. 

Westpac Senior Economist Michael Gordon told Ryan Bridge they expect the peak unemployment rate to be around 5.3% or slightly higher. 

He says that the labour market tends to be one of the more lagging parts of the economic cycle. 

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Episode Transcript

Speaker 1 (00:00):
We get another look into our job market today, and
I wouldn't hold your brief if you're expecting good positive news.
Economists reckon unemployment set to hit five point three percent,
highest and nine years, up from five point one in
the last quarter. Michael Gordon, Westpac senior economists with me
this morning. Michael, good morning, Good morning. Is this as
bad as it's going to get?

Speaker 2 (00:19):
I think we're getting towards the end of it, if
not necessarily there yet, because the labor market tends to
be one of the more lagging parts of the economic cycle.
Even as we've seen some signs of better activity this year,
it's taken we're not seeing the same a degree of
improvement come through in the jobs numbers. Yet we know
that hiring is pretty low at the moment, so it's

(00:40):
sort of hard to get people out of unemployment if
businesses aren't hiring at the moment. So we're thinking probably
the peak in the unemployment rate is either around here
or slightly higher, But maybe by the end of this
year early next year we should see some science of improvement.

Speaker 1 (00:55):
Okay, what about this idea of labor hoarding where people
firms are anticipating things will get better, so you hold
on to staff hope, you know, carry them over until
things get better. But actually things are taking a long
time to get better, so do those people get let
go in the meantime?

Speaker 2 (01:12):
I think there is an element of that already happening.
It is again a part of that that lagged aspect
of the cycle. But we did see I think, you know,
a couple of years ago, we were hearing from businesses
that they were sort of weary of getting burnt by
the labor shortages that we've had experienced relatively recently, and

(01:32):
we're trying to hold on to people. I think it
was probably, you know, that was the story up until
about a year ago. Since then we have seen that
job shedding going on. So again there's probably a bit
of catch up and still maybe some more to go
there before businesses really feel like they are their right
size for the amount of work that's on.

Speaker 1 (01:48):
And Michael, who is being made unemployed young people grads.

Speaker 2 (01:54):
That has been the case. I think it's an unusual
degree in this cycle. Again, going back to a couple
of years ago, the we're a lot of young people
that were brought into the labor force when there were
really severe worker shortages, so it was a hot economy.
Border was closed so you couldn't get mirgrant workers, and
so a lot of people were actually who were already
in study were being brought into work as well. Now

(02:14):
we're seeing the reverse of that. A lot of these
people are, you know, they're either out of work or
not able to find a job in the first place.
In many cases, they're just concentrating on their studies and
they're not counting towards the ranks of the actively unemployed.
They just get counted as not in the workforce.

Speaker 1 (02:30):
Michael, does it feel like every time you talk to
one of us journos that you are saying it will
get better soon, it will peak, you know, and it's
going to peak soon, and it's going to be over soon,
and it keeps getting dragged out.

Speaker 2 (02:42):
Yeah. Yeah, there's definitely a cry of are we there
yet that's been going for a while. I Mean, a
key part of managing the cycle really lies with the
Reserve Bank. They you know, they have done a lot
the big part of their job in terms of lowering
interest rates. It's taking some time to feed through into
what borrowers are actually paying and then hopefully sort of

(03:04):
freeing up some cash for them to do something less.
We kind of knew it was going to be a
gradual pace, given that the timing of when people would
be able to move on to those lower re interest rates.
But yeah, I can always feel very drawn out when
you're talking about something that's you know, you know it's
going to take a year or so, and you're having
to talk about it every day.

Speaker 1 (03:23):
I feel like you've summed it up perfectly there, Michael,
Thank you. Michael, Gordon Whispac Senior Economists. For more from
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Speaker 2 (03:35):
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