It’s the population growth, stupid

Paula Bennett has responded to today’s announcement of a ten year high in the unemployment rate.

Social Development Minister Paula Bennett pointed to an increase of 14,500 people in the working age population.

“There are simply more people joining the workforce, which is outstripping job growth,” said Bennett.

Didn’t she even bother to read the media release, let alone the background statistics, released by Government Statistician Geoff Bascand today before commenting on it?

During the last year, employment fell by 53,000 or 2.4 percent. There were large decreases in the number of people employed in the Auckland and Canterbury regions. There were also marked decreases in employment in the manufacturing; retail trade and accommodation; and arts, recreation, and other services industries.

Loss of jobs is what is to blame. We all knew that major job losses would happen without Government intervention. But Bennett chose to do nothing to create employment, and now blames the horrendously high unemployment statistics on a few returning New Zealanders and immigrants.

17 Comments Posted

  1. Wat, how on earth do you assume that “maintaining house prices” is an issue to me? Quite the reverse, despite the fact I am a house owner, I recognise that house prices in New Zealand are far too high. In terms of affordability, even with the lower interest rates presently pertaining, house prices are still at record highs in terms of affordability. About one third of house purchasers are now spending 30% or more of their income on financing their property, this has trebled over the last twenty years. The median house price in NZ is 5.7 times mean annual income, the second highest after Australia in the English speaking countries, and this is nearly double what is considered the “norm” of a ratio about 3 times.

    It is not healthy for our society to have such over-priced housing. When we borrow for a mortgage from a bank, then the bank in turn borrows from overseas. We have a total so-called “corporate” overseas debt of aroun $240 billion. Approximately $180 billion of this is private mortgages. The interest alone on this must by about $9 billion p.a. If house prices are overvalued by one third, and this is a conservative estimate, as above, then overvalued property is costing us $3 billion p.a in interest alone, all paid to overseas investors and speculators. And one wonders why New Zealand is poorer than it should be? And that’s to say nothing of the social cost of young families trying to get a foothold as property owners, or at least having the choice to be. (This is how it effects our balance of payments, simple really)

    What is strange about this in New Zealand, is that in other countries, these soaring prices have partly been related to very low interest rates, but our interest rates have always been high here, partly to discourage exactly this house inflation. Hasn’t worked that well. But one factor that is recognised in many newspaper articles and elsewhere is the continued demand for houses due to high levels of immigration. I mean, it’s not exactly unknown as an economic principle of supply and demand, that a higher demand for a product in an inelastic market causes higher prices. Strange that this principle seems to have escaped our economic planners and politicians for so long.

    So why, when we are having this problem, and unemployment, are we continuing to import so many more people, it doesn’t make sense. But then when did New Zealand’s economic and social policies make sense in the last thirty years?

  2. Like many “new” countries like the US, New Zealand is a nation of immigrants, people arriving these days generally have skills that are in short supply, or are from the less fortunate parts of the world and (generalizing) have far less skills to offer and so take on jobs that the settled population are not interested in.
    Unemployment is up across the world even in nations where there is very little immigration, so the fact that New Zealand’s unemployment situation is better than in most western country’s underlines the fact that immigration is not having that great an effect as many would believe.

  3. If Paula has difficulty writing the truth, reading documents in such a way as to misunderstand the documents meaning, and fails to understand the underlying numbers has she failed the 3Rs.
    On a more serious note, the official unemployment rates( percentage) is “those not in employment divided by those in the labour market” or something close to that with the employment rate “those in employment divided by those in the labor market”. Some figures can manipulate employment figures to get to fulltime equivalents. What is hidden in the OECD definitions is those who drop out of the labour market because they have givven up looking, hence the rates/perventages can be udnerstated. I once compared Census data looking at FTE jobs as a percentage of working aged NZers across about 100 years and found little fluctuations, including in the Great Depression and the so-called era of full employment of the 1950-60s. Intersting stuff statistics.

  4. – “High rates of immigration at a time of employment stress and economic downturn, in a country with grossly overvalued housing market and huge and continuing balance of payments deficits makes no sense”

    Surely if maintaining house prices is an issue then high immigration is exactly what you’d want? And what has immigration got to do with the balance of payments?

  5. ” a few returning New Zealanders and expatriots” To the year ending November 2009 there was a gain of 20,000 people in external migration. That’s hardly a few .

    High rates of immigration at a time of employment stress and economic downturn, in a country with grossly overvalued housing market and huge and continuing balance of payments deficits makes no sense.

    Please see my expanded comments in another posting.

    In addition if immigration is an issue, are these all illegal immigrants Paula is talking about, or is the government incapable of directing immigration policy? I suspect the latter, as immigration “policy” in New Zealand is a joke, and has been for at least twenty years.

  6. Um, icehawk – a 2.4% drop in employment.

    Unemployment rates have nothing to do with how many people either don’t retire or stay in the workforce after the age of 65.

    That statistic impacts on employment rates – not unemployment rates.

    Get it?

  7. There are simply more people joining the workforce, which is outstripping job growth

    Also it’s due to people not leaving the work force. The baby boomers aren’t retiring as fast as expected. Due to many things, but economic uncertainty is certainly one of them.

  8. “It took 1 year of National to get it back up.”
    Ahh so National ran Wall st’s sub-prime market, prior to taking up office in Wellington. Gee they were an influential bunch!

  9. spin there wat dabney — sure thing in that final paragraph of yourn! So disappointing!

    mebbe if we have shrubco call you, you’ll get their very own salutary stimpak, which in USD today is running at 160bn a year. Iraq only I believe.. mebbe you could add the figures for Afghanistan, Pakistan and wherever else.. that today’s US taxpayers gotta find.. real productive stuff you’d agree.. hah

  10. – “It seems that it took 9 years of Labour government to get the unemployment rate down to 4%. It took 1 year of National to get it back up. ”

    So it wasn’t simply fortuitous timing for Labour – a period of high growth all around the world – coupled with the deregulation by earlier governments which saw the unemployment rate down at 4%?

    What exactly were Labour’s brilliant policies that achieved that feat then?

  11. Right! If a population growth of tens of thousands of people can’t generate any jobs then there is something bad going on.

    It seems that it took 9 years of Labour government to get the unemployment rate down to 4%. It took 1 year of National to get it back up.

  12. “We all knew that major job losses would happen without Government intervention.”

    It is politically-motivated intervention in the economy which is precisely the problem.

    Downturns are a feature, not a bug, of a free-market economy. Ordinarily they would be regular and modest as bad investments are closed down and the resources reallocated to produce things that people actually want and can afford.
    The problem is that self-interested politicians do everything in their power to keep the booms going as long as possible (the “government intervention” you argue for), with the result that instead of an ongoing sequence of minor corrections we get end up these major booms and busts which are so disastrous for so many people.

    Look at the United States with its obscene “stimulous” package which is nothing but a free-for-all for every special-interest group and politically-connected industry: that’s the reality of your call for politicians to seize still more of our money and spend it according to their own priorities.

  13. We have the lowest rate of home building since records began in 1966 (state house building should always take up the slack in a recession when building costs are lower – this is sound counter-cyclical investment and job creation planning).

    So the Minister blames returning Kiwis for rising unemployment – was there no awareness in this government that an international recession might cause such an inflow of ex-pats and thus a stonger jobs programme was required?

    Will we have to wait for reports of looming housing shortages caused by the returning ex-pats as well before more state housing building finally gets going?

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