So the unemployment rate was on the low side of expectations. However, as I and others have said – hours worked collapsed, so surely this is the first sign of worse to come.
However, lets think about this a little more. Falling hours worked only really matter (in a welfare maximising sense) if people want to work more hours. Fundamentally, we need to see underemployment ticking up. But is that the case?
First lets look at actual underemployment numbers. Now these numbers will exaggerate the significance of the increase in underemployment, as the working age population is increasing.
Source (Stats NZ infoshare – HLFQ.SNH3JA)
Now, someone eyeballing the data may say that it ticked up strongly in December – indicating that the labour market is loosening. However, this would betray the fact that this happens EVERY December. As a result, we must seasonally adjust it:
When accounting for normal seasonal gyrations, underemployment is virtually unchanged.
As a result, unemployment is still in “tight” territory, and is rising surprisingly slowly given the decline in economic activity AND underemployment isn’t changing. Sure hours worked are falling, but people don’t want to work the extra hours at the current wage rate anyway.
This isn’t a situation of an underutilisation of resources and as a result current figures don’t demand government action.
Sure, we may believe that the labour market is not going to clear at some point in the near future – but given how slowly it is moving I’m not sure we can take that as a fact …