ECONOMICS : Learning About Our Economic Backbone

Agriculture is the backbone of the country, we are often told, but only this year has it been included in Statistics New Zealand’s “business demography statistics (structural)”. These have been improved with the inclusion of new data, back cast to February 2000 to enable trends to be studied. The series now covers all industries.
As the first publication of the expanded statistics explains, business demography statistics “provide an annual snapshot (as at February) of the structure and characteristics of New Zealand businesses”. The series covers economically significant individual, private-sector and public-sector enterprises engaged in the production of goods and services. This generally includes all enterprises in the country with GST turnovers greater than $30,000 year.
The first snapshot is of New Zealand businesses at February last year, when we had 463,380 enterprises operating from 499,940 business locations and hiring 1.923 million employees. The number of enterprises in the country was up two percent (8880) from February 2006 while the number of employees engaged grew 2.3 percent (up 42,400).
Industries showing significant growth were property and business services (up 6890), followed by finance and insurance (up 1890) and construction (up 1260). The biggest decline (here’s where we learn something about the condition of the economy’s backbone) was in the agriculture, forestry and fishing industry, down 1860. There were 78,010 enterprises predominantly engaged in those sectors, decrease of 1860 (2.3 percent) from February 2006. Most of this decrease (72 percent) was from non-employing enterprises. In farming, it’s fair to suppose, property amalgamations accounts for significant chunk of this decline. But the agriculture, forestry and fishing industry engaged around 113,800 employees, up 1500 (1.3 percent) from the previous year, mainly in services to agriculture industries.
Most enterprises in New Zealand (97 percent) had fewer than 20 employees in February 2007, but these accounted for only 31 percent of all employees. Enterprises with 100 or more employees made up 0.5 percent of the total number of enterprises but employed 46 percent of all employees.
In the year to February 2007, the strongest growth in employment came from businesses with 100 or more employees (up 27,300 employees or 3.2 percent), followed by firms with 50 to 99 employees (up 4500 employees or 2.7 percent).
But the best known statistics, for anyone checking the health of the labour market, are the quarterly Household Labour Force Survey (HLFS) and Quarterly Employment Survey (QES). The 2007 December-quarter HLFS showed record-high employment levels, numbers of people in the labour force and labour force participation, and the lowest unemployment rate since the survey began in March 1986. The December-quarter QES showed continued business demand for labour: in the 2007 calendar year, the number of full-time equivalent employees increased 3.3 percent, driven by 3.5 percent increase in full-time employment and 2.2 percent increase in part-time employment. The increase in total gross earnings continued to outpace the annual increase in total paid hours, resulting in 4.1 percent increase in average total hourly earnings for the year.
QES average earnings statistics reflect not only the changes in pay rates, but also compositional and other changes across and within the paid workforce. The Labour Cost Index, on the other hand, measures changes in salary and wage rates for fixed quantity and quality of labour input. This showed 3.4 percent increase in salary and wage rates (including overtime) last year, the largest since the series began in late 1992.
Prime Minister Helen Clark, addressing Parliament at its first session of the year, rattled off raft of statistics of this sort to persuade us the economy is in good nick. She threw in total working-age benefit numbers, down by almost 140,000 on the numbers Labour inherited from the previous government, household incomes in real terms had risen 25 percent in the past eight years … and so on.
Strong employment and wage growth rules out the labour market as rich vein for opposition politicians eager to score points about the Government’s economic management. But they can carp about the extent to which household incomes are eroded by the tax take, and they can cavil at government expansion: 44,335 staff are employed by the public service, up five percent in the year to June 2007. The opposition also has highlighted 967 percent rise in Ministry of Agriculture and Forestry staff earning more than $100,000 (there are 160 staff in that category compared to just 15 when Labour came to power) and 65 percent ballooning of total MAF staff numbers in that time. strengthening of the backbone of the bureaucracy, we may presume.

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

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