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Christina Leung: NZIER Principal Economist on the unemployment rate which is expected to rise · The SME Stream

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  Speaker 1: Jobs darted up today, most economists are picking between four
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  Speaker 1: point nine and five point one increase in Principal economist
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  Speaker 1: Christina Jung is back, Well, it's Christina, good morning to you.
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  Speaker 1: Moder a four point nine to five or five point one?
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  Speaker 1: What's your call.
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  Speaker 2: We're expecting the unemployment rate to pick up to just
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  Speaker 2: over five percent in the September quarter. So if we
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  Speaker 2: look at other labor market indicators, they do point to
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  Speaker 2: a further weakening in hiring. For example, our own inded
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  Speaker 2: al quarterly serve our Business Opinion shows that while firms
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  Speaker 2: are starting to feel a bit more optimistic about general
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  Speaker 2: economic conditions, certainly when it comes to hiring, there's still
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  Speaker 2: quite a bit of caution out there. Over a third
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  Speaker 2: of firms reduce heat count in the September quarter, and
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  Speaker 2: then around nine percent are indicating that they plan to
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  Speaker 2: reduce staff numbers in the next quarter.
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  Speaker 1: What's your pick for a peak and when?
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  Speaker 2: So, we do expect that the unemployment rate will peak
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  Speaker 2: at just under six percent towards the end of next year.
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  Speaker 2: It bears to remember that labor market does tend to
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  Speaker 2: lag broader economic activity, and that reflects the fact that
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  Speaker 2: firms when it comes to once they see that slowing
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  Speaker 2: in economic activity. Generally, you do initially see some a
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  Speaker 2: bit of labor hoarding going on, particularly where when we
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  Speaker 2: look at the hat just how acute labor shortages have
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  Speaker 2: been over the COVID nineteen pandemic period, firms are reluctant
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  Speaker 2: to have to go through that again. So it's not
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  Speaker 2: until there's actually quite a sustained slowing, which is what
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  Speaker 2: we've seen, that firms do start to shed workers and
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  Speaker 2: hence you get that slowing, broader slowing in the labor market.
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  Speaker 1: Are we seeing variability in the jobs, you know, geographically
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  Speaker 1: and industry wise or sect the wise.
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  Speaker 2: Yeah, So if we look at the slowing in terms
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  Speaker 2: of the shedding of workers the labor market, where that
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  Speaker 2: weakening is it is fairly broad based. Healthcare is one
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  Speaker 2: area where there's been where it's been pretty resilient in
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  Speaker 2: terms of jobs and for jobs. But when it comes
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  Speaker 2: to it for example, professional services and construction, there's been
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  Speaker 2: weakening in those areas, and that reflects the impact the
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  Speaker 2: negative impact of higher interest rates on demand. Now, higher
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  Speaker 2: interest rates over the past year has reduced demand in
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  Speaker 2: a lot of areas. For example, when it comes to construction.
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  Speaker 2: It's made the feasibility of a lot of development projects
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  Speaker 2: no longer feasible because of that high cost to borrow.
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  Speaker 2: And generally, when you think about investment, it's the cost
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  Speaker 2: of borrowing versus the return on investments. So the fact
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  Speaker 2: that with higher interest rates it made it harder to
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  Speaker 2: get a lot of those development projects off the ground.
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  Speaker 2: We've seen that comes through in weakness and construction demand,
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  Speaker 2: and then when it comes to professional services, that reflects
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  Speaker 2: that broader US weakening in demand in the news and economy.
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  Speaker 1: Good stuff, Christina Precier very much. Christina Lung inst i
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  Speaker 1: Eer Principal Economists,