Public sector and primary industries drive job market gains
New Zealand’s Monthly Employment Indicator (MEI) showed a modest improvement in August, with filled jobs up 0.2% from the previous month. That followed July’s result, which was revised down from a 0.2% gain to flat.
Westpac NZ senior economist Michael Gordon (pictured right) cautioned against over-interpreting the first release.
“This measure tends to be overstated on the first release – the initially reported 0.2% rise in July has been revised down to zero, and we suspect the same will happen with the August figures,” Gordon said.
Even so, he noted the trend suggests some improvement.
“The jobs market appears to be stabilising again after a renewed downturn through the autumn months in particular,” Gordon said.
Public sector and primary industries lead job growth
Growth was concentrated in public administration, healthcare and education, as well as agriculture and mining. Gordon added there were “encouraging signs of an uptick in wholesaling, retailing and manufacturing, although we’ll wait to see whether these survive future revisions.”
By contrast, construction and professional services continued to see declines, reinforcing the uneven nature of the labour market recovery.
ASB senior economist Mark Smith (pictured right) highlighted the role of sectoral differences.
“Employment in the goods sector showed the strongest monthly increase in around four years (+0.6% mom, -2.8% y/y),” Smith said, noting improvements in interest-rate-sensitive areas like construction and manufacturing.
Historical revisions highlight weaker starting point
The August data also incorporated downward revisions to prior months, suggesting the labour market has been weaker than initially reported.
“The earlier reported +0.2% July increase was revised down to a flat outturn, with the level of employment revised down by 0.8% compared to July,” Smith said.
On an annual basis, jobs were 0.7% lower than a year earlier, while employment remained about 2% below its March 2024 peak.
Youth and services sector remain under pressure
The services sector, which makes up around 75% of total filled jobs, rose just 0.1% in August, with professional services and hospitality seeing the sharpest annual declines. Youth employment also remains under strain, with jobs for 15-19 year-olds down 8.2% year-on-year.
Smith noted regional differences, with employment growth holding up better in Otago and Canterbury, while falling in Wellington and Auckland.
Job market outlook tied to unemployment and OCR cuts
Despite the stabilisation, Westpac expects the unemployment rate to rise further in the September quarter.
“At a time when the working-age population is still growing, albeit slowly, this would suggest a further uptick in the unemployment rate for the quarter,” Gordon said.
Smith agreed that while conditions are stabilising, the outlook remains soft. He expects the unemployment rate to peak in the low 5% range before easing late in 2025 as hiring picks up again.
“There is still significant spare capacity in the labour market, and it will take a concerted period of strong growth to push the unemployment rate down to the 4.0-4.5% Goldilocks zone,” the ASB economist said.
ASB continues to forecast further monetary policy support.
“Given the lack of growth tailwinds apparent, we expect 75bp of OCR cuts and a 2.25% OCR by year end as the RBNZ provides more economic support to the economy and broader labour market,” Smith said.
For more information, read the insights from Westpac and ASB.
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