August 6, 2024 • 11 mins
New unemployment figures make a change in the Official Cash Rate now less likely.
Stats NZ numbers out today show unemployment hit 4.6% in the June quarter, up from 4.3% in the March quarter.
It's what the Reserve Bank predicted, although economists were forecasting 4.7%.
Herald Business Editor at Large Liam Dann told Kerre Woodham any number above expectations would've made a cut more likely.
He says it could still happen, but the interest markets that predict OCR changes had a cut next week priced in.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
You're listening to the carry wood of morning's podcast from
news Talk seed B.
Speaker 2 (00:11):
As we heard just before the news, unemployment and indeed
during the news unemployment has risen again. The later stats
show unemployment reached four point six percent in the June quarter,
up from four point three percent in March and well
up from three point two percent in December twenty one.
In the March twenty two quarters, Liam Daniel zelland Herold's
(00:32):
business editor at large, joins me, Now, very good morning
to you.
Speaker 3 (00:36):
Good morning, Gerry.
Speaker 2 (00:37):
Well, it's good morning because we're employed. Yeah, yeah, that's good.
Speaker 3 (00:41):
Over the past year, thirty three thousand people have joined
the unemployment you or so that is pretty grim. Look,
the number is roughly where it was expected to be.
It was actually slightly below some of the economists forecasts.
It was bang on the reserve bank. So I guess
(01:01):
the first thing to say, just in very binary terms,
when the market's looking at it, makes that the prospects
of an interest rate cut, an o CR cut next
week probably less likely than more likely. So because it
needed to be quite a bad number to probably push
that over the line, could still happen, you know, if
markets keep collapsing and all that sort of stuff. But
(01:24):
you know, the interst rate markets that try and predict
these things had it almost priced in fully, like almost
one hundred percent, that it was going to get cut
next week, even though it doesn't really line up with
what the Reserve Bank's been saying, so it would have
had to have been a big u turn by the
Reserve Bank. Could still happen, anything can happen, but this
number today doesn't make it more likely.
Speaker 2 (01:46):
What would have like five yeah.
Speaker 3 (01:48):
I would look yeah, or even just like four point
eight or something above the economists expectations. I mean this
has banged on the reserve banks expectation. There may be
and I haven't been right through all some of those things,
like the under utilization or the rate at which were
creating jobs. There's probably some stuff below the surface that
is potentially could be more ugly. But you know, it's
(02:09):
not great. It's just that it's what roughly people thought
was happening in the economy, and it is happening.
Speaker 2 (02:15):
The thing that's been the kicker for me all the
way through, right since Adrian or said yes, we are
trying to engineer a recession. Right back when in the
Select Committee. Is that it's people. These these stats are humans, and.
Speaker 3 (02:29):
It's worse well for me, it tugs at my heartstrings
a bit harder. It's young people. Yes, that's what is
really tough, and that is how we fix inflation, and
unfortunately it's how we've done it before. So the youth
unemployment rate fifteen to twenty four these would be kids
who aren't in school or aren't in training, is now
above twenty percent, and that's really high.
Speaker 2 (02:52):
It is really high. And when you've got a large
pool of unemployed young people, trouble follows, sure as follows.
Speaker 3 (02:59):
You know, then you don't really have to think too
hard to work out why they're being drawn into gangs.
And you know, the longer longer they're out of work,
the less likely they are to get back in because
you fall out of the whole system. So that is
a bit of a worry. Absolutely, I would hope that
we do start see it as to see it turn.
(03:21):
I mean, there's no no point racing ahead and cutting
rates in August if we then get another spike of inflation.
And you know, we do have to make sure inflation's gone,
but if it could be you know, a steady fallen
rates from October. I'd be probably happy with that, and
you know, we might see some businesses start to pick
up again and and perhaps the unemployment rate won't peak
(03:44):
quite so high this time.
Speaker 2 (03:45):
Are they looking at things like you know, Winston's pulp
and paper millon Peyhoo, that's that's shut down for two
weeks And if they don't, if they can't get some
kind of agreement on their electricity price, then they're going
to shut I mean all this all this stuff.
Speaker 3 (04:02):
Yeah, I mean it's you know, and and it's it's
not just job losses, it's the lack of job creation.
Speaker 2 (04:10):
So therefore of uncertainty and a lack of confidence in
the manufacturing industry and investing.
Speaker 3 (04:17):
And if you're not playing you know, as much attention
as listeners here will be and and readers of the Herald,
then you know, there there are young people who probably
there was a real labor shortage and so there was
plenty of jobs, you know, just eighteen months two years ago,
and that's switched very fast, and so you know there
(04:38):
may be people who just picked up a job and
now now just can't find work. And it's yeah, it's
just tough. Those of us still in work, although I
never quite managed to make the numbers marry up with
my own experience. But the average wages continue to rise.
(05:01):
Good for you, Liam, Well, no, they don't match never
never quite managed to sort of have the matchmak experience.
But it's about so that that they've kept up with
inflation at four point three percent. And I'm sure listeners
will be thrilled to hear that it's the public sector
that's had the highest rate of increase. But look, to
be fair, it's not bureaucrats and Wellington and communications staff
(05:26):
getting those I think it was a bunch of therapists
and childcare workers and people on the front lines. And
it is slightly the nature of public service pay that
it comes in a big chunk, and that came through
this quarter. I think so they saw an increase of
around six point nine percent annually.
Speaker 2 (05:45):
So June is such a long way away too, really,
isn't it. And I know we've talked about this before,
but it's you know, come on, let's try and get
some up to date numbers.
Speaker 3 (05:56):
Yeah, I mean it is. It is difficult. They actually
have to go out and survey a large number of
people to get this data.
Speaker 2 (06:03):
We do.
Speaker 3 (06:04):
Look, we do have the job seeker data that is
like coming straight from from the you know who's on benefits,
and that's rising too. But this, this one gives us
a consistent sort of picture going right back to nineteen
eighty six, so it's valuable. And it's difficult to get wage.
This collects wage data two ways, and that that's quite useful.
(06:27):
It collects and asks some employers what their wage bill
has gone up by and then it also asks workers
what their what's happened to their wages with overtime and
without overtime, So are two different surveys. So it's quite
a big piece of work. I think, yeah, I would
look if there was one area. I don't know. We're
trying to save money on public service stuff, but right
(06:49):
now the stats would be a place to to move
because you know, if it means that the Reserve Bank
can move fast, and yeah, everyone will be happy.
Speaker 2 (06:58):
Exactly. It would have such an impact.
Speaker 3 (07:00):
It's saved businesses potentially, yes, exactly, talking about six weeks
for a rate cut or four weeks or three weeks.
Sometimes that's enough to be the difference for some businesses.
Speaker 2 (07:10):
So absolutely. The other thing too, is does it tell
us how many people are back in work? Because that
was June, we're now August. Does it tell us how
many people are back in work job creation?
Speaker 3 (07:25):
I will look through. It does tell us underutilization, which
has risen. That's people who are looking for looking for
more hours. Yeah, I've got part time work and would
like to see more employed. Quarterly changed, So yeah, this
is a tiny percent increase there in employed.
Speaker 2 (07:49):
Interesting, all right, so I want to hear right, No,
that's okay. So the o C was paper the o C.
I was looking for bigger numbers before it moved decisively.
Speaker 3 (08:00):
Well, well, those of us that were probably hoping to
see the rates come down, A bigger number would have
made that more likely. I mean, I guess the Reserve
Bank should. This is a factor for the Reserve Bank.
But of course unemployment has been removed as part of
the mandate, so it's only looking at inflation with a
caveat that. It always pays attention to the indicators, and
(08:21):
unemployment is a big indicator of how much demand is
coming out of the economy. But it doesn't have to
go Oh that's terrible about youth unemployment. We need to
not work economy, and it's the argument.
Speaker 2 (08:36):
The other thing is, if anyone wants to understand about
international markets and the effect that the Tokyo Stock Exchange
had on the markets, look at your key, we save
a balance. Yeah, ignore it, don't look Yeah, just look
at it and then ignore it.
Speaker 3 (08:53):
Yeah, yeah, that's right. And those tech stocks, which look
I made the mistake of looking at mine last Friday,
and it looked really good. But I did think at
the time it's that's too good, and it's been benefiting
from all those tech stocks which are over inflated and
fingers crossed on that one. The market selloffs are always
a bit of a worry, and we're heading into the
(09:13):
September October. The last thing the world now needs now
is a massive crash. But we do kind of want
to see the bubble deflate a bit in those tech
stocks because that's a bit dangerous. And as interest rates
come off, we'll see the US FED move in September
and cut rates almost certainly. Now as that happens, some
of the more real world stocks, your power companies and
(09:34):
banks and things will start to do better because just
because what happens is you're not getting as much for
your money in the bank, so the big money moves
out of the banks and into the equity markets. So
you know, we've been propped up by a tech bubble,
tech boom, maybe a bubble, and it's sort of a
massive repositioning of money around the world. And then this
(09:55):
Japan thing was a whole other thing because they've got
inflation for the first time in thirty years, and all
the currency traders and bond traders are trying to work
out what that means. And that's it was out of
a sort of a ten percent down and nine percent
up or something like that percent down and nine percent up,
So that's pretty wild. Yeah. I mean the other thing
(10:16):
I say is, you know it is worrying, don't look
at your balance too much, look long term, but do
enjoy the drama to some extent. I know we do
in business sections. But it's it's fascinating and it's a
chance to pay a bit more attention and read what's
going on, and then coming out the other end might
have might have learned a bit more for the next cycle.
Speaker 2 (10:35):
So you know, why not mine went down nine thousand
dollars over yeah, over three days, And I know it's
just you know'dical money.
Speaker 3 (10:45):
But unless unless you were right about to Right when
I was hearing it last night, I was talking at
a seminar thing and someone was being paid in foreign
shares and they had a tax bill and they needed
to liquidate the foreign cheers and they had received received
these foreign cheers just as it crashed. Was nothing you
(11:06):
could do.
Speaker 2 (11:06):
So somebody has just doses, why is the US looking
at job growth? Where the opposite?
Speaker 3 (11:10):
Why is the US looking at job growth? For the
US economy has been strong, strong, quite strong right throughout
this and defied high interest rates. But the data that
came in on Friday and spook markets there, that was
one of the triggers. All the Japan stuff was weaker
than expected. So after sort of defying gravity for most
(11:31):
of this year, the US is finally talking about recession.
And they don't like it. I mean, we know it's
pretty brutal, but we're kind of more used to it
in New Zealand we are, and you know, even a
minor recession just creates a major panic on markets in
the US. So I think that may not last. That
job growth all.
Speaker 2 (11:50):
Right, Liam Dan, always good to talk Liam Dan, New
Zealand Herald business editor at large News Talk said B.
Speaker 1 (11:57):
For more from Kerry Wood and Mornings, Listen live to
News Talk said B from nine am weekdays, or follow
the podcast on iHeartRadio
You're listening to the carry wood of morning's podcast from
news Talk seed B.
Speaker 2 (00:11):
As we heard just before the news, unemployment and indeed
during the news unemployment has risen again. The later stats
show unemployment reached four point six percent in the June quarter,
up from four point three percent in March and well
up from three point two percent in December twenty one.
In the March twenty two quarters, Liam Daniel zelland Herold's
(00:32):
business editor at large, joins me, Now, very good morning
to you.
Speaker 3 (00:36):
Good morning, Gerry.
Speaker 2 (00:37):
Well, it's good morning because we're employed. Yeah, yeah, that's good.
Speaker 3 (00:41):
Over the past year, thirty three thousand people have joined
the unemployment you or so that is pretty grim. Look,
the number is roughly where it was expected to be.
It was actually slightly below some of the economists forecasts.
It was bang on the reserve bank. So I guess
(01:01):
the first thing to say, just in very binary terms,
when the market's looking at it, makes that the prospects
of an interest rate cut, an o CR cut next
week probably less likely than more likely. So because it
needed to be quite a bad number to probably push
that over the line, could still happen, you know, if
markets keep collapsing and all that sort of stuff. But
(01:24):
you know, the interst rate markets that try and predict
these things had it almost priced in fully, like almost
one hundred percent, that it was going to get cut
next week, even though it doesn't really line up with
what the Reserve Bank's been saying, so it would have
had to have been a big u turn by the
Reserve Bank. Could still happen, anything can happen, but this
number today doesn't make it more likely.
Speaker 2 (01:46):
What would have like five yeah.
Speaker 3 (01:48):
I would look yeah, or even just like four point
eight or something above the economists expectations. I mean this
has banged on the reserve banks expectation. There may be
and I haven't been right through all some of those things,
like the under utilization or the rate at which were
creating jobs. There's probably some stuff below the surface that
is potentially could be more ugly. But you know, it's
(02:09):
not great. It's just that it's what roughly people thought
was happening in the economy, and it is happening.
Speaker 2 (02:15):
The thing that's been the kicker for me all the
way through, right since Adrian or said yes, we are
trying to engineer a recession. Right back when in the
Select Committee. Is that it's people. These these stats are humans, and.
Speaker 3 (02:29):
It's worse well for me, it tugs at my heartstrings
a bit harder. It's young people. Yes, that's what is
really tough, and that is how we fix inflation, and
unfortunately it's how we've done it before. So the youth
unemployment rate fifteen to twenty four these would be kids
who aren't in school or aren't in training, is now
above twenty percent, and that's really high.
Speaker 2 (02:52):
It is really high. And when you've got a large
pool of unemployed young people, trouble follows, sure as follows.
Speaker 3 (02:59):
You know, then you don't really have to think too
hard to work out why they're being drawn into gangs.
And you know, the longer longer they're out of work,
the less likely they are to get back in because
you fall out of the whole system. So that is
a bit of a worry. Absolutely, I would hope that
we do start see it as to see it turn.
(03:21):
I mean, there's no no point racing ahead and cutting
rates in August if we then get another spike of inflation.
And you know, we do have to make sure inflation's gone,
but if it could be you know, a steady fallen
rates from October. I'd be probably happy with that, and
you know, we might see some businesses start to pick
up again and and perhaps the unemployment rate won't peak
(03:44):
quite so high this time.
Speaker 2 (03:45):
Are they looking at things like you know, Winston's pulp
and paper millon Peyhoo, that's that's shut down for two
weeks And if they don't, if they can't get some
kind of agreement on their electricity price, then they're going
to shut I mean all this all this stuff.
Speaker 3 (04:02):
Yeah, I mean it's you know, and and it's it's
not just job losses, it's the lack of job creation.
Speaker 2 (04:10):
So therefore of uncertainty and a lack of confidence in
the manufacturing industry and investing.
Speaker 3 (04:17):
And if you're not playing you know, as much attention
as listeners here will be and and readers of the Herald,
then you know, there there are young people who probably
there was a real labor shortage and so there was
plenty of jobs, you know, just eighteen months two years ago,
and that's switched very fast, and so you know there
(04:38):
may be people who just picked up a job and
now now just can't find work. And it's yeah, it's
just tough. Those of us still in work, although I
never quite managed to make the numbers marry up with
my own experience. But the average wages continue to rise.
(05:01):
Good for you, Liam, Well, no, they don't match never
never quite managed to sort of have the matchmak experience.
But it's about so that that they've kept up with
inflation at four point three percent. And I'm sure listeners
will be thrilled to hear that it's the public sector
that's had the highest rate of increase. But look, to
be fair, it's not bureaucrats and Wellington and communications staff
(05:26):
getting those I think it was a bunch of therapists
and childcare workers and people on the front lines. And
it is slightly the nature of public service pay that
it comes in a big chunk, and that came through
this quarter. I think so they saw an increase of
around six point nine percent annually.
Speaker 2 (05:45):
So June is such a long way away too, really,
isn't it. And I know we've talked about this before,
but it's you know, come on, let's try and get
some up to date numbers.
Speaker 3 (05:56):
Yeah, I mean it is. It is difficult. They actually
have to go out and survey a large number of
people to get this data.
Speaker 2 (06:03):
We do.
Speaker 3 (06:04):
Look, we do have the job seeker data that is
like coming straight from from the you know who's on benefits,
and that's rising too. But this, this one gives us
a consistent sort of picture going right back to nineteen
eighty six, so it's valuable. And it's difficult to get wage.
This collects wage data two ways, and that that's quite useful.
(06:27):
It collects and asks some employers what their wage bill
has gone up by and then it also asks workers
what their what's happened to their wages with overtime and
without overtime, So are two different surveys. So it's quite
a big piece of work. I think, yeah, I would
look if there was one area. I don't know. We're
trying to save money on public service stuff, but right
(06:49):
now the stats would be a place to to move
because you know, if it means that the Reserve Bank
can move fast, and yeah, everyone will be happy.
Speaker 2 (06:58):
Exactly. It would have such an impact.
Speaker 3 (07:00):
It's saved businesses potentially, yes, exactly, talking about six weeks
for a rate cut or four weeks or three weeks.
Sometimes that's enough to be the difference for some businesses.
Speaker 2 (07:10):
So absolutely. The other thing too, is does it tell
us how many people are back in work? Because that
was June, we're now August. Does it tell us how
many people are back in work job creation?
Speaker 3 (07:25):
I will look through. It does tell us underutilization, which
has risen. That's people who are looking for looking for
more hours. Yeah, I've got part time work and would
like to see more employed. Quarterly changed, So yeah, this
is a tiny percent increase there in employed.
Speaker 2 (07:49):
Interesting, all right, so I want to hear right, No,
that's okay. So the o C was paper the o C.
I was looking for bigger numbers before it moved decisively.
Speaker 3 (08:00):
Well, well, those of us that were probably hoping to
see the rates come down, A bigger number would have
made that more likely. I mean, I guess the Reserve
Bank should. This is a factor for the Reserve Bank.
But of course unemployment has been removed as part of
the mandate, so it's only looking at inflation with a
caveat that. It always pays attention to the indicators, and
(08:21):
unemployment is a big indicator of how much demand is
coming out of the economy. But it doesn't have to
go Oh that's terrible about youth unemployment. We need to
not work economy, and it's the argument.
Speaker 2 (08:36):
The other thing is, if anyone wants to understand about
international markets and the effect that the Tokyo Stock Exchange
had on the markets, look at your key, we save
a balance. Yeah, ignore it, don't look Yeah, just look
at it and then ignore it.
Speaker 3 (08:53):
Yeah, yeah, that's right. And those tech stocks, which look
I made the mistake of looking at mine last Friday,
and it looked really good. But I did think at
the time it's that's too good, and it's been benefiting
from all those tech stocks which are over inflated and
fingers crossed on that one. The market selloffs are always
a bit of a worry, and we're heading into the
(09:13):
September October. The last thing the world now needs now
is a massive crash. But we do kind of want
to see the bubble deflate a bit in those tech
stocks because that's a bit dangerous. And as interest rates
come off, we'll see the US FED move in September
and cut rates almost certainly. Now as that happens, some
of the more real world stocks, your power companies and
(09:34):
banks and things will start to do better because just
because what happens is you're not getting as much for
your money in the bank, so the big money moves
out of the banks and into the equity markets. So
you know, we've been propped up by a tech bubble,
tech boom, maybe a bubble, and it's sort of a
massive repositioning of money around the world. And then this
(09:55):
Japan thing was a whole other thing because they've got
inflation for the first time in thirty years, and all
the currency traders and bond traders are trying to work
out what that means. And that's it was out of
a sort of a ten percent down and nine percent
up or something like that percent down and nine percent up,
So that's pretty wild. Yeah. I mean the other thing
(10:16):
I say is, you know it is worrying, don't look
at your balance too much, look long term, but do
enjoy the drama to some extent. I know we do
in business sections. But it's it's fascinating and it's a
chance to pay a bit more attention and read what's
going on, and then coming out the other end might
have might have learned a bit more for the next cycle.
Speaker 2 (10:35):
So you know, why not mine went down nine thousand
dollars over yeah, over three days, And I know it's
just you know'dical money.
Speaker 3 (10:45):
But unless unless you were right about to Right when
I was hearing it last night, I was talking at
a seminar thing and someone was being paid in foreign
shares and they had a tax bill and they needed
to liquidate the foreign cheers and they had received received
these foreign cheers just as it crashed. Was nothing you
(11:06):
could do.
Speaker 2 (11:06):
So somebody has just doses, why is the US looking
at job growth? Where the opposite?
Speaker 3 (11:10):
Why is the US looking at job growth? For the
US economy has been strong, strong, quite strong right throughout
this and defied high interest rates. But the data that
came in on Friday and spook markets there, that was
one of the triggers. All the Japan stuff was weaker
than expected. So after sort of defying gravity for most
(11:31):
of this year, the US is finally talking about recession.
And they don't like it. I mean, we know it's
pretty brutal, but we're kind of more used to it
in New Zealand we are, and you know, even a
minor recession just creates a major panic on markets in
the US. So I think that may not last. That
job growth all.
Speaker 2 (11:50):
Right, Liam Dan, always good to talk Liam Dan, New
Zealand Herald business editor at large News Talk said B.
Speaker 1 (11:57):
For more from Kerry Wood and Mornings, Listen live to
News Talk said B from nine am weekdays, or follow
the podcast on iHeartRadio
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