Looming job and work hours crunch

The number of people in work recovered in June but there are still 20,000 fewer jobs than before the effects of Covid hit at the end of March, and earnings are down – many people have had wage rates cuts and ordinary and overtime hours cut.

While the New Zealand economy has weathered Covid reasonably well (due to a large amount of Government borrowing) a deep recession is predicted.

The Covid wage subsidy, which is propping up hours and jobs, ends next month so there is a looming job loss and wage cut crunch, unless there’s a sudden turnaround in business activity.

Stuff: Job numbers continue to recover after the Covid-19 slump, but wages still down

The number of jobs filled has continued to rise after the April lockdown, according to Stats NZ numbers out on Tuesday.

Filled jobs were up by 2053 in June, to 2.2 million. This followed a rise of 14,399 jobs in May.

Stats NZ economics statistics manager Sue Chapman said there had been month-on-month increases over the last two months after the sharp drop in April of more than 35,000 jobs.

So that’s about 18,000 down from March.

“We calculate filled jobs by averaging weekly jobs paid throughout the month, based on tax data. Filled jobs include jobs paid by employers who are being subsidised by the Covid-19 wage subsidy scheme.”

But many people who have kept their jobs have had pay cuts. The subsidy for people who had been full time requires them to be paid at least 80% of their previous wages – many have had their pay cut to 80%.

Gross earnings for the three months ending June were down $304 million (0.9 percent) on earnings in the March quarter.

This was the first time since the series began in 1999 that June quarter gross earnings were lower than March, Chapman said.

“While job numbers dropped and then started to recover, it is clear that salaries and wages received throughout the quarter have taken a hit,” Chapman said.

And it is predicted to get quite a bit worse.

Christina Leung, principal economist with the New Zealand Institute of Economic Research (NZEIR) said around 2 million people were either on the benefit or the wage subsidy scheme, which represented around 53 per cent of the working age population.

Around 65 per cent of people employed are on the wage subsidy scheme, she said.

“We forecast job losses of over 200,000 by June 2021,” Leung said.

“We expect unemployment rate to peak at around 8 per cent in late 2022. 

That’s over a year away.

The wage subsidy runs out next month, but I’m hearing employers already looking at what to do from September, and a number are talking about job losses or further pay cuts.

The actual impact of that in numbers will be felt straight away by many workers, but the total numbers probably won’t be apparent until after the election.

And some cuts will be delayed. Many companies are waiting and seeing while propped up by the subsidy. Some have already signalled closures later – a department store in Dunedin will close next January.

The economic news isn’t all bad. Grant Robertson in parliament yesterday – 1. Question No. 1—Finance:

On Friday, Statistics New Zealand released overseas merchandise trade statistics for June 2020. These showed total exports were up from the same time last year.

Goods exports in June were worth $5.1 billion—up $107 million from June 2019. The rise was led by dairy; with milk powder, butter, and cheese up $90 million, or 7.9 percent.

The value of log exports was also up by 7 percent since June 2019. This strong performance from our exporters contributed to a monthly trade surplus of $426 million in June.

The trade deficit for the year ending June was $1.2 billion—the smallest annual trade deficit since December 2014. All of this effort by our exporters demonstrates the continued strength of that part of our economy, despite the difficult prevailing conditions arising from the COVID-19 pandemic.

This is just some sectors. While the trade deficit is relatively small that will be affected by lower imports. And some sectors, particularly tourism and hospitality, have been badly affected, and the outlook for them over the next few months looks bleak.

And we are not over Covid yet, especially world-wide, but as some places have shown (like Victoria in Australia) it can easily come back.

Stuff: Mortgage holidays could be extended, wage subsidy back if needed

Minister of Finance Grant Robertson said the Reserve Bank of New Zealand extending mortgage holidays would be “justified” as he confirmed that the bank is considering elongating the scheme for Kiwi borrowers whose pay packets have taken a hit from Covid-19.

Robertson, in an interview with Stuff, also said that if parts of New Zealand were to enter a new level 3 or level 4 lock down in the event of Covid-19 community transmission re-emerging, that the wage subsidy could be reinstated.

That’s if Covid comes back, but people are already significantly affected.

According to the New Zealand Bankers’ Association, at June 30, 7 per cent of consumer loans (almost 60,000 loans) had had all payments deferred, while another 8 per cent of consumer loans had reduced repayments.

That’s over 120,000 loans.

The next set of National Accounts are due to be released on September 17 two days before election day) and will show the extent of New Zealand’s recession. Those figures will include most of the level 4 lock down period.

Robertson said that $14 billion held back last week from the $50 billion fund the Government created to fight Covid was crucial to wheel out if the economy, which has turned up since lockdown, starts to wobble again. Such measures could be required if the global downturn starts dragging New Zealand down further, or if community transmission broke out, and new regional wage subsidies were required.

That won’t help the many workers likely to be affected when the subsidy comes off, presuming Covid stays away.

Dark economic outlook

Robertson also warned that although economic conditions in New Zealand are comparatively robust, the global economic outlook was looking darker by the day. Official figures come out with the Pre-Election Fiscal Update on August 20, but Robertson said that The Treasury has given him preliminary warnings.

“The New Zealand economy has definitely come out of this better and quicker than we thought albeit still tough circumstances. The global economic story is the opposite. It appears to be getting worse.”

So the New Zealand economy hasn’t ‘come out of this better’, the full impact of an international recession hasn’t hit here yet. And our current economic situation is propped up by billions of borrowed money.

And despite all the money being dished out many workers are likely to find things tougher still after the subsidy runs out next month.

My job is reliant on business getting going again in countries currently severely affected by Covid with no quick turn-around expected. My earnings are down to 80% and could easily drop to half time of not to zero if things don’t improve internationally over the next few months. I know of another local business cutting 50 jobs and cutting hours of remaining employees by 25%.

And with Covid cases rising world wide the worst may not be over.

Flaring virus threatens world economy’s sputtering recovery

The world economy’s fragile recovery is in danger of stalling.

A resurgence of coronavirus infections across the Asia-Pacific region, which was considered to have broadly curbed the virus more effectively than elsewhere, is being viewed as an early warning for the rest of the world.

The pandemic continues to rage in parts of the US, hot spots in Europe, and across big emerging economies including India and Brazil. With little prospect of a circuit breaker until a vaccine is discovered and distributed, governments are having to double down on the US$11 trillion worth of stimulus and unprecedented central-bank support unleashed since the crisis began.

The US Federal Reserve meets this week to decide on interest rates as US lawmakers debate another US$1 trillion fiscal stimulus package. The European Union has just signed off on a planned €750 billion crisis package and governments everywhere are having to extend support programmes.

While China’s economy returned to growth last quarter and readings on industrial output have shown a V-shaped rebound, both consumer demand and private investment remain weak.

The US rebound is stalling after coronavirus infections spiked in a host of states.

“The global economic recovery is at risk,” said Mark Zandi, chief economist at Moody’s Analytics. “Key to ensuring the global economy doesn’t slide back into recession in coming months is continued aggressive monetary and fiscal support.”

In New Zealand we may be heading for a job and earnings crunch in the next month or two, but that may just be a phase in amongst larger and longer financial turmoil.

Leave a comment

43 Comments

  1. John J Harrison

     /  29th July 2020

    We are only just keeping our head above water because we have incurred debt of $140 Billion.
    With 65% of workers on a government subsidized payroll for only another few weeks the inevitable result will be a wholesale depression.
    The hapless current government is working day and night to ensure the punters are kept in the debt funded drug induced mood of deception until post September 19th.
    If the government supporters had an independent thought and realized that the socialist utopia was about to collapse then they may favor a competent ACT/National coalition to get us all out of the inevitable carnage.
    Current government MP’s would then find themselves both unemployed and unemployable due to their “skill sets.”
    Horror of horrors !

    Reply
    • Blazer

       /  29th July 2020

      National have one plan=build more …roads.

      HOPELESS!

      Reply
      • Alan Wilkinson

         /  29th July 2020

        That’s one more than Labour has unless you count throw more money as a plan. However National has also got RMA and urban planning reform while Labour just exempts itself from RMA tentacles whenever it suits.

        Labour has half the working age population on a benefit or 80% wage subsidy. A socialist fantasy economy.

        Reply
        • And a lot of those still on full unsubsidised pay will be public servants or government employees.

          Reply
        • Duker

           /  29th July 2020

          The numbers who have taken the wage subsidy extension has fallen dramatically.. it’s half what was expected
          Judith’s answer is people take $20 k from kiwisaver account to start a business…
          Domestic travel is back to 70% of Air NZ previous flights…not good for those that depended on foreign tourists but thatsvacworldwide problem
          Australia has limited Sydney arrivals to 350 per day….so it’s very common not just NZ

          Reply
    • Alan Foster

       /  29th July 2020

      So, what you have done?

      Reply
    • John, that’s only 28 billion for every person in NZ. :-/

      Reply
  2. Corky

     /  29th July 2020

    September 1st. A day that will go down in infamy for Aotearoa. But will the blinkers come off in time for the election? Unfortunately no.

    Mikey was relating this morning of a travel agent he personally knows who has told him when the wage subsidy comes off, if nothing else is done, they will close.

    If my experience is anything to go by, we are talking more than a recession. Surely others on this blog must have had businesses they deal with close?

    Reply
    • Duker

       /  29th July 2020

      More of your pie in the sky nonsense …armed insurrection yet ?
      Of course a travel agent cant survive …not news there. Hosking was a big one for Singapore Airlines first class travel
      Wiser minds say the unemployment might get to 9% ( of workforce not population) , much lower than the early 90s under National and its mother of all budgets when it got to 11%.
      Whats Ruth up to these days…snout in a trough at a Chinese State owned business ..oh the hypocrisy

      “Bank of China (New Zealand) – Director
      http://www.rrnz.co.nz/

      Some of her former directorships ended when the National party lost office…..does she still follow that ‘mexican Actress’ Hayek…hahahaha

      Reply
      • Corky

         /  29th July 2020

        Sorry, wouldn’t have a clue what you are on about with that mish mash of bs. I will leave it for wiser minds to translate.

        Reply
        • You have predicted armed insurrection; you even did it in the lockdown, if I remember.

          And armed ‘ferals’ would be bursting into houses, taking the dunny rolls and groceries and doing a bit of rape and pillage while they were there.

          Reply
          • Duker

             /  29th July 2020

            Yes the Archives have it all from corky
            https://yournz.org/2020/03/30/essential-businesses-review-easter-trading-to-be-considered/#comment-403576
            “It’s beyond me how you can’t understand context. Let me repost my original comment here:

            ”That becomes the end times when money becomes obsolete for human existence. Money, however, will still be horded by people hoping for things to improve. I will do that to a certain extent. I could charge $100 dollars for a toilet roll should supplies start to run out.”

            The inference there is we are at the’ end times.”

            As i look out the window, I wonder where the Apocalypse went ?

            Reply
  3. Blazer

     /  29th July 2020

    Even taking Covid out of the equation a severe recession is long overdue.

    So called market forces ,failed spectacularly when the GFC hit in 2008.

    It showed what a fragile base, fiscal and monetary policy was reliant on.

    Artificial device of money expansion and low interest rates emphasises what a magic show Capitalism has become.

    The world is awash with unpayable debt,but we are meant to accept it is not…inflationary.

    Yes an Auckland ex state house is ‘worth’ $1 million ….very good.

    NZ is positioned better than most to weather the looming storm of unemployment and contraction of the holy grail=GDP.

    Mind you the price of Capsicums is a…worry!

    Reply
    • Pink David

       /  29th July 2020

      Well Blazer, he is you chance to introduce a new system without GDP.

      Reply
  4. Brian Johnston

     /  29th July 2020

    National and Labour are both leftist socialist globalist parties. Socialism, communism, globalism and capitalism all go together. The capitalists use socialism as a control mechanism.
    Remember
    Douglas – Rogernomics with Labour.
    Richardson – Ruthenasia with National.
    Both were wrecking balls.
    Both supported the privatisation of electricity which resulted in a 300% increase.
    Now that we have that out of the way, where do we go.

    Firstly I believe Jac will win the election. Which will see a continuation of agenda 2030 and all sorts of other crazy socialist mumbo jumbo.

    National will have no choice but to totally restructure. Sack the lot and start again and that includes all chairman and branch personnel etc. National should rebuild as the Patriots.
    They wont do it.

    Peters has never lived up to his name of NZ First and hopefully is gone at this election.
    Peters has turned a blind eye to all the foreign ownership and is now attempting to resurrect himself by promoting Tiwai. To little, to late. He should simply get out of the way.

    This Billy Bloke or is that Billy Goat, who is running around, take a look, no policy. Just an opportunist or in horse racing parlance, a roughie, an outsider, something not worth betting on. Dangerous.

    Forget the Greens they support importing pork on boats which produce CO2.
    The Greens in Sweden are pro environment and anti fluoride.
    NZ greens are anti environment and pro fluoride – Genter
    And pro landfill – Sage.
    Snake Shaw has to go.

    That leaves us with The Outdoors Party and Social Credit. Should they unite?

    When the election is over we will have to rebuild.

    Reply
  5. Who would want to win the election? I believe it will be a good election to lose. The economy was teetering before Covid-19 struck. Now, it is in trouble and soon it will be in free fall. Labour will win the election and things will be OK for a while… Christmas coming up and the St Jacinda was reelected woop-woop factor. Come the new year, the economy will crash, unemployment and business failures will soar. I am retired so it will not affect me much, but I feel sorry for poor who will be most affected and the new graduates who will be unable to find a job.

    Reply
  6. Alan Wilkinson

     /  29th July 2020

    Rutherford had it right: “We have no money so we must think”. And having thought, act.

    Multiple tasks:
    1. Remove regulatory barriers to action.
    2. Educate and mentor to support thinking.
    3. Resource action.

    I don’t think much if any of that will happen. We have a nation focused on stopping people doing things. The outlook is bleak.

    Reply
    • Duker

       /  29th July 2020

      Is his payments being topped up by outside sources ?

      Reply
      • Duker

         /  29th July 2020

        Remember this one
        “Another document shows Roger Kerr offering to top up another columnist’s usual payment from the Dominion by a further $500 “to make it worth the trouble” to write an article where the “thinking is in line with that in our study”.
        https://investigatemagazine.co.nz/14193/deborah-coddington-pinged/
        That ‘easy 500’ now could be 1500 in todays money

        Reply
        • Alan Wilkinson

           /  29th July 2020

          I don’t know what you are on about. It has no relevance to my comment and no information about what the article was about or how much work was involved and is also ancient history. A long-dead squirrel.

          Reply
    • Alan, have you read Little Dorrit ? The Circumlocution Department is alive and well 160+ years later.

      Reply
      • Alan Wilkinson

         /  29th July 2020

        I don’t remember it and if so it was way back in my school days when I read a lot.

        Reply
  7. The PM’s ‘instinct’ that told her to go against ‘evidence and science’ and shut the country down for almost two months didn’t also tell her that closing businesses would result in job losses. One doesn’t have to be an economist to know that wages are only part of a business’s costs and that the other costs don’t stop because the business is closed.

    Reply
  8. David

     /  29th July 2020

    We took on 2 guys last week and would take on more if we could, turned down the work instead.
    Neighbour put their house on the market and it had 4 offers in the first week and now sold, ugly bloody thing it is too and quite a perky price.
    Finished a rental property and rented first day available and the return 🙂
    Landlord at my local had his best month ever and has a real spring in his step.
    Our hotel had a very profitable month, better than last year but 15% of the staff which to my mind is a great model going forward, the staff who were great will return back to their home countries.

    Its pretty great out there I just wonder what country these economists live in or do they just want to gain fame by being the kiwi Dr Doom.

    Reply
    • Alan Wilkinson

       /  29th July 2020

      The housing market is booming because of returning expats. Some of the tourist market is doing well because of displaced foreign travel. Retail is suffering I think. Exports reportedly have done ok which is surprising.

      Reply
      • Gezza

         /  29th July 2020

        We have yet to see whether the PRC retaliates against our cancelling our extradition treaty with Hong Kong by targeting some of our exports.

        Reply
      • Alan, I see a lot of sales. EziBuy was selling some things at what must have almost cost price. Farmers has always had Red Dot sales and clearance racks, of course. But there do seem to be more sales than usual.

        KMart is hardly worth going into at the moment with all their empty shelves. They say that they will have new stock arriving, and I hope for their sakes that they do.

        Reply
    • Tom Hunter

       /  29th July 2020

      My son’s workplace:
      – division X has fired 4 out of 5 staff
      – division Y has fired everybody and been dis-established.
      – his division had no firings but only because it’s the most profitable, and even then there was downsizing pressure from senior managment .

      My contacts:
      – two service companies have merged with two others to save themselves.
      – But in both cases they’ve let go staff: 3 out of 5 for one and 2 out of 6 for the other.

      Other businesses that I know of are experiencing a surge in work – but as they’ve told me it’s all catchup stuff from the lockdown period. Like all businesses they’re peering ahead 6 months and their order-books are not looking too hot. In every case they’ve told me – and their staff – that they’re hanging on to them through the wage subsidy period but after that ends…. So people should start looking for new jobs.

      Our stats gathering is not detailed and very slow, as Croaking Cassandra has made clear many times, so our leaders really do not have a good handle on what’s happening.

      But at the level of everyday lives, make no mistake, this is bad and getting worse.

      Reply
      • John J Harrison

         /  29th July 2020

        Hear, hear Tom.
        Our so-called leaders in government have zero clue as to what is happening as they have had zero “ hands on “ experience in business.
        Utterly disgraceful !
        I hope your son remains safe in a rapidly diminishing job market.

        Reply
      • Duker

         /  29th July 2020

        Gerry was a woodwork teacher, Goldsmith was PR specialist and author, Bridges was a small town prosector, Shane Retirement was a GP, Todd Maclay was a politicians bureaucrat, Chris Bishop was a party cadre before a short break for a tobacco government lobbyist before back to parliament

        Tell us about the business experience you talk about…that’s the top team in order from the Nats website…doesn’t include all the dropkicks who aren’t fit for the job, also party cadres and PR tyoes
        It’s total nonsense about business experience….in fact it’s laughable..even Muller worked the PR and government lobby side of Fonterra ..he employed Nicola Willis in the company, knows nothing about a dairy factory or the marketing side
        National party is fund raising organisation who would sell their soul to Chinese interests

        Look at Ruth Richardson now directors of Chinese state-owned business, bank of China, and Synlait…..the mighty have fallen , as she loves state owned business when it’s the Chinese way

        Reply
        • John J Harrison

           /  29th July 2020

          Duker , cup of tea time and a nap.

          Reply
          • Duker

             /  29th July 2020

            Oh so deflecting…you can’t name those business savvy MPs can you.
            The marvel Key was a currency trader …whoopdybdee for all the NZ companies that aren’t…English was a treasury bureaucrat,…the farm stuff was just where he grew up , no different to Ardern, Helen Clark, Judith Collins all grew up on farms.

            Reply
          • Blazer

             /  29th July 2020

            thats called ‘Muller time’ ..these days!Bol.

            Reply
        • Alan Wilkinson

           /  29th July 2020

          Collins ran her own businesses. I see you managed to overlook her.

          Reply
          • Duker

             /  29th July 2020

            Restaurant..she was a tax lawyer in Wellington , the partner she worked for was Charles Chauvel
            Ok smarty pants ,what was the business of the rest…Upston was a self employed accounts/secretarial services…you’ve hit the jackpot with that one.

            To be generous you have more business experience than the top half of Nats MPs put together, a real business not something daddy arranged for them…you would have done something like that non.?

            Reply
        • Blazer

           /  29th July 2020

          The facts are way too much for the Nats faithfool Duker…you are destroying their delusions..and they don’t like it…one bit.

          Reply

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