This follows from Part One.
Well, the unemployment rate rose to 3.9% – this was above market expectations, so the immediate feeling would be that the labour market is in trouble.
However, then you see the increase in employment and HOURS WORKED (the indicator I wanted to keep an eye on) and you realise “this employment data isn’t hot – but it is a definite improvement on what last quarter implied”.
So what am I talking about, and why am I talking in the third second person? (ht CPW) Well lets start with the first question, and lets look at the hours worked numbers.
During the March quarter hours worked fell 1.7% in the household labour force survey, but they didn’t in the quarterly employment survey. People tend to trust the HLFS more and so they got scared. Of course, it turns out that the HLFS has decided to be jumpy as hell, with hours worked rising 2.4% over the June quarter – more than reversing the March fall.
As a result, hours worked has not tumbled as we would expect at the beginning of a recession – now this in no way implies that we aren’t having a recession. What it does imply though, is that the chronic shortage of labour that we have had in the past has helped prevent much loosening in the labour market in the face of a recession – a fact that must stress the hell out of the RBNZ, which is why the dollar lept when the numbers came out.
My interpretation is that today’s number, by itself, overstates the strength of the labour market. However, the March number, by itself, understated it. I think that the labour market has stalled. It makes sense that firms will want to hold labour – given the difficulties they have had getting them in the first place.
Furthermore, the fact that hours worked haven’t fallen substantially on a year earlier is very interesting – and seems to imply that demand for labour by firms still exists, a piece of information that is just not consistent with firms that anticipate a prolonged slowdown!
One extra tidbit – employment and hours worked rose during a period of massive structural layoffs. Silver Fern was closing down plants as it restructured and Fisher and Paykel decided to produce overseas. With all these anecdotes of a collapsing labour market we didn’t get one – what gives? If anything this suggests to me that the labour market may be even STRONGER than current numbers suggest – interesting.
Third Second person?
Now why was I talking in the third second person? Well there are two reasons:
Firstly, I suspect that these numbers will force the RBNZ to ask itself some tough questions – as they used the weak March numbers to justify cuts, and if anything today’s result implies that the March numbers were spurious. By going into the third person I can try to imagine what they must be thinking.
Secondly, I’ve had too much coffee, and didn’t get much sleep last night after seeing the Phoneix lose the pre-season cup final – damn the boys deserved a win!