NZ isn’t the US: Employment rates

So often we hear that, even though the unemployment rate is falling in the US, employment is low.  It is the low level of employment, and the lack of integration in the community that entails, that is causing so much anger over there.  The lack of opportunity illustrated through the low employment rate is one of the key pieces of information pulled out to suggest something must be done.

Often people in New Zealand talk as if whatever is happening in the US is happening here, therefore something must be done.  However, lets be a bit more careful – especially as in the case of the employment rate that is untrue.


remprSource:  Stats NZ.  Quandl.

Yes, the story is more complicated (Working for families increased the number of second earners in the labour market, a factor that will in of itself have pushed up the participation and employment rates).  But if anything that suggests we need to be a lot more careful applying “lessons” from the US situation to New Zealand.  We are not the United States – a point we’ve noted when looking at median income comparisons in the past 😉



4 replies
  1. Luc Hansen
    Luc Hansen says:

    Great graph, Matt. They say – or said, when I was growing up – that when the US sneezes the world catches a cold, but clearly we caught the flu in mid-eighties while the US was basking in the sunshine.

    What happened there?

    I think I can see clearly the effects of Rogernomics, doubled down on by Ruthanasia just as we were staggering out of the gloom (that’s the uptick from about 89 – 90).

    Your take?

    • Matt Nolan
      Matt Nolan says:

      We had our most horrible post-Great Depression recession in the late-1980s and early-1990s – not in 2008-now.

      I wouldn’t go as far as saying it was clearing the impact of government policy – after all “Ruthanasia” didn’t kick into action until 1991 … when the employment rate was at its lowest. And remember, employment rates lag the impact of any policy – if anything eyeballing the data would imply that this boosted employment rates.

      Not that I actually think that to any great degree. Instead it illustrates that the drivers were other things. The real drivers were things like the failure of BNZ, the sharp decline in our terms of trade, the dual loss in wealth from a stockmarket crash and the collapse in the non-residential building market.

      The fact the structure of the economy was being changed at the same time – with NZ moving from very protectionist to not – did make us vulnerable to a large external shock. However, rather than blaming policy directly, I would use it as a lesson that that are losers from policy change and their welfare is something we also need to consider – so you suddenly drop subsidies, perhaps it is a good idea to help reduce the costs associated with people upskilling and moving into other work!

      • Luc Hansen
        Luc Hansen says:

        Really good points, Matt, thanks. I’m sure that after the next three semesters of macro papers I’ll be able to improve on my analysis, I hope ; ) (and I hope Sam doesn’t see that I missed the lag!)

        And there is good news in your graph: the gap between the US and us reverses on the RHS, surely indicating that our country is much more resilient these days. But it’s tempting to think that five years after the GFC more could be done to lift the rate back to 66%.

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