Economics: Jobs for the statisticians?

When it comes to reducing unemployment, the Government has had precious little to boast about, essentially because economic growth has been sluggish. When asked if he had confidence in his Minister of Finance, Prime Minister John Key said an inability to downscale unemployment is the consequence of “very difficult economic times”. These included the Christchurch earthquakes, the global financial crisis “and the absolute mess we inherited from Labour”.
So how, he was then asked, could he have confidence in minister who predicted in Budget 2011 that unemployment would be full one percent below the level recorded in the March quarter? Key riposted by highlighting employment growth rather than the unemployment rate. New Zealand had more jobs than ever before in the country’s history. “I do not call that failure,” he said.
He repeated this observation during this year’s Budget debate on May 24. The unemployment rate was higher than the Government would like, at 6.7 percent, he said. “But let us also acknowledge the following: more people have jobs in New Zealand than ever before in our history…”
That claim went unchallenged until Rob Salmond, contributing to the Pundit blog on May 28, had go. Now assistant professor in the Department of Political Science at the University of Michigan, his post included chart showing the unemployment rate at its highest level in some 10 years. And he recorded Key’s rejoinder – that New Zealand now has more jobs than ever before in the country’s history.
Then he pointed out the obvious: more people have jobs now because New Zealand has more people now, which has little to do with the Government or its policies. Another of his charts showed the number of people in work rises pretty much every quarter, unless there is large-scale problem like global financial crisis.
The unemployment rate was much better indicator of government economic management than the raw number of jobs, Salmond insisted. But what if we did adopt “more jobs than ever before” as the standard for judging government economic success? Well, Labour achieved it in 30 of its 36 quarters in office, whereas National had achieved it in only four of its 13 quarters in office. Labour could boast an 83 percent success rate; National scored just 31 percent.
But that was in May. The latest household labour force survey showed the unemployment rate nudged up from 6.7 percent to 6.8 percent in the June quarter, the highest for two years.
Since the March 2011 quarter, the employment rate has remained around 63.9 percent. Statistics NZ said this indicates employment growth is only keeping pace with the working-age population.
Key had facile explanation. The increase in the unemployment rate was “a very small, technical rise”. He was not overly concerned, although the Government had hoped the number would fall slightly. “From what we can see, employment is rising in all parts of the country: except Christchurch. So the Christchurch numbers are dragging it down little bit.”
But isn’t the Christchurch recovery being led by the government-established Canterbury Earthquake Recovery Authority? CERA certainly claims on its website that its role includes providing leadership and coordination for the ongoing recovery effort, focusing on business recovery, restoring local communities and making sure the right structures are in place for rebuilding, enabling an effective and timely rebuilding… And so on.
It reports to the Minister for Canterbury Earthquake Recovery Gerry Brownlee who is responsible for coordinating the planning, spending and actual rebuilding work needed for the recovery.
Brownlee and CERA have been armed with special powers “to enable an effective, timely and coordinated rebuilding and recovery effort”. The Government accordingly can’t duck taking some of the responsibility for the Canterbury impact on rising unemployment.
More important, Statistics NZ’s latest Household Labour Force Survey shows the number of people employed fell by 2000 in the June quarter. The employment rate dropped 0.3 percentage points to 63.8 percent, because employment was decreasing while the working-age population continued to grow. By the PM’s standard, the Government therefore scored another “fail” mark during the quarter. M

Bob Edlin is leading economic commentator and NZ Management’s regular economics columnist.

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