Matt Nolan

June 08 labour market: The first half

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So the quarterly employment survey and the labour cost index came out yesterday.

Now remember that the pointer for me was hours worked – I wanted to see how far they fell before making any judgments on the state of the labour market. The kicker is that they rose!

According to the tables in the QES total hours worked was up 2.0% on a year ago, and up 0.5% (seasonally adjusted) on March. These figures are still weak were moderate (ht CPW), but they are stronger then I, or many analysts, were expecting – especially given the low level of net migration at the moment. Overall this suggests that unemployment could potentially come in below the 3.8% rate that is predicted by the market .

The LCI was marginally weaker than market expectations, rising 0.75% over the quarter compared to a forecast 0.8%. This took annual growth in the LCI to 3.5%. As the LCI is effectively productivity adjusted this is telling us that underlying inflationary pressures remain elevated.

Anyone else have much to say about the labour market data before the HLFS comes out on Thursday?

Other sites on employment: The Standard, Tumeke, Rates Blog.

Economists: BNZ, ANZ (not currently online), Westpac, ASB, Infometrics (subscription required).

Matt Nolan

What is poverty?

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Poverty is not an issue that we have touched on terribly much on this blog – however it is a fundamentally important issue when it comes to discussing what outcomes we want as a society.

Now the general impression is that poverty is bad, at least that is how I feel when I hear the word. However, a general feeling is not enough to base policy on – we have to define “poverty” and then define what we think is an appropriate way of increasing social welfare with respect to poverty.

There are two different ways of defining poverty in a population of people: Relative and absolute.

Absolute poverty measures tell us that if a person/household cannot afford a certain bundle of goods, they are experiencing poverty. Relative poverty tells us that if a person/household is in a certain income decile, or earns only a certain proportion of the average wage then they are poor.

A good casual defense of the absolute poverty measure is provided by Tim Harford (*) while a strong case for discussing relative poverty is given by Terence at LAANTA (*)

Now both poverty measures are extremely useful, but neither neatly fits into the strict “feeling” of poverty that society as a whole wants to deal with. In order to understand how to use these measures, we have to ask “why does society care about poverty”?

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Matt Nolan

June Labour market preview: Employment and hours

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Next week we have the labour market data – an incredibly important data set when trying to figure out what happened over the June quarter.

While most other economists will be talking about their picks for unemployment etc (Note: Unemployment in the 4’s will be a concern), I thought I would discuss some of the things we should keep an eye on whenwe all try to analyse the data next week 🙂

On that note, the Economists View blog discussed some of the issues that have seen employment and unemployment act relatively sluggishly in the face of both economic slowdowns and accelerations over the last decade.

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Matt Nolan

July NBNZ business outlook

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I don’t usually write about his, as I don’t actually have access to the historical numbers, but I thought that this time the July Business Outlook was worth a look.

Three main things stick out of it like an eyesore:

  1. Own activity expectations are down to -8.2%, a bad result. This is mainly to do with a negative outlook for the construction industry.
  2. Employment and unemployment measures have deteriorated – indicating that the labour market is loosening.
  3. Pricing intentions and inflation expectations are up.

Now the low own activity expectations imply that the September quarter has not got off to a good start in terms of economic growth – this will be an important measure to keep an eye on going forward.

Most interestingly, the fall seems to be primarily the result of a weaker outlook for the construction industry and NOT retail. This is a touch surprising, especially given the 16% increase in retail fuel prices over the three months to July.

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Matt Nolan

Institutional Economics column 26/07/2008

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An excellent current affairs column by Dr Stephen Kirchner of Institutional Economics (*).

For all my bleating, the inflation problem in Australia is considerably worse than it is here, just look at this:

Excluding the transport group from the CPI, the component most directly affected by higher oil prices, still yields an inflation rate of 1.2 per cent over the quarter and 4.1 per cent over the year

Damn. For people interested in the data the CPI stuff is here, and the all important labour market stuff is here (note that unemployment fell in Aussie!).

Next weeks labour market data will be all important for us here in New Zealand – I’m still picking that the economy will pick up from about September, just soon enough to prevent non-tradable inflation from easing sufficiently. If September quarter GDP rises by less than 0.5% (with an equivalent fall in June), I might have to take that back – but we won’t get those numbers till December 🙂