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Inside Economics: Why the job market feels worse than the numbers look

Why New Zealand's Job Market Feels Far Worse Than the Official Numbers Suggest

In the realm of economic indicators, few metrics carry as much weight as unemployment rates. They serve as a barometer for the health of a nation's workforce, influencing everything from government policy to consumer confidence. Yet, in New Zealand, a puzzling disconnect has emerged: while official statistics paint a picture of a resilient job market with historically low unemployment, the lived experiences of many Kiwis tell a starkly different story. Workers report heightened anxiety, precarious employment conditions, and a sense of economic fragility that belies the rosy headlines. This article delves into the underlying factors contributing to this mismatch, exploring why the job market feels so much worse than the numbers might imply.

At first glance, the data appears reassuring. New Zealand's unemployment rate has hovered around 3.4% in recent quarters, a figure that would be the envy of many developed economies still grappling with post-pandemic recovery. Employment growth has been steady, with sectors like healthcare, education, and technology adding jobs at a consistent clip. The labor force participation rate remains high, suggesting that more people are actively seeking and finding work. These numbers, drawn from sources like Statistics New Zealand's Household Labour Force Survey, indicate a market that has bounced back remarkably from the disruptions of COVID-19 lockdowns and global supply chain snarls. Policymakers, including those at the Reserve Bank of New Zealand (RBNZ), often cite these figures as evidence of economic stability, using them to justify decisions on interest rates and fiscal spending.

However, beneath this veneer of positivity lies a more nuanced and troubling reality. One of the primary culprits is underemployment—a phenomenon where workers are employed but not to their full potential. This includes individuals stuck in part-time roles who desire full-time work, or those whose skills are underutilized in jobs that don't match their qualifications. Recent surveys reveal that underemployment affects a significant portion of the workforce, with estimates suggesting it's running at around 10-12%, far higher than the headline unemployment rate. For many, this translates to financial strain: part-time wages often fail to cover rising living costs, exacerbated by inflation that has pushed up prices for essentials like housing, food, and energy.

Take, for instance, the hospitality and retail sectors, which have been hit hard by economic headwinds. While job ads in these areas might still appear plentiful, the quality of those positions has deteriorated. Many roles offer irregular hours, minimal benefits, and little job security, leaving employees vulnerable to sudden shifts in business conditions. Stories abound of workers who, after years of stable employment, find themselves navigating a gig economy landscape dominated by short-term contracts and zero-hour arrangements. This precarity fosters a pervasive sense of instability, even among those who are technically employed. It's not uncommon to hear from young professionals in Auckland or Wellington who juggle multiple part-time gigs just to make ends meet, all while dealing with the mental toll of unpredictable income.

Another layer to this disconnect stems from wage dynamics. Despite low unemployment, real wage growth has been sluggish, failing to keep pace with inflation. Over the past couple of years, nominal wage increases have averaged around 3-4%, but when adjusted for rising costs, many workers have seen their purchasing power erode. This is particularly acute in regions outside major urban centers, where job opportunities are scarcer and competition fiercer. In places like the South Island's rural communities, the closure of manufacturing plants or slowdowns in tourism have forced workers into lower-paying alternatives, amplifying feelings of economic downgrade. Economists point out that this wage stagnation is partly a legacy of the pandemic, where businesses, battered by restrictions, have been cautious about raising salaries amid uncertain demand.

The broader economic context further intensifies these perceptions. New Zealand's economy has been navigating a delicate balance between recovery and restraint. High inflation, peaking at over 7% in recent times, prompted the RBNZ to hike interest rates aggressively, reaching levels not seen in over a decade. While these measures aim to cool price pressures, they've also dampened business investment and consumer spending, leading to a slowdown in hiring. Firms are holding off on expansion, opting instead for cost-cutting measures that include freezing recruitment or reducing hours. This creates a job market that feels "tight" in terms of availability but "soft" in terms of quality and compensation. Moreover, the influx of migrants post-border reopenings has added complexity; while it bolsters the labor supply, it can intensify competition for entry-level positions, pushing some locals to the margins.

Demographic shifts play a role too. An aging population means more retirees are re-entering the workforce part-time to supplement pensions, which can mask underlying weaknesses in full-time job creation. Younger workers, particularly those under 30, face barriers like student debt and housing unaffordability, making career progression feel like an uphill battle. Mental health surveys from organizations like the New Zealand Institute of Economic Research highlight how these factors contribute to widespread burnout and disillusionment. Workers describe a "hustle culture" where overtime is normalized but unrewarded, leading to higher turnover rates and a cycle of job-hopping in search of better conditions.

Experts argue that traditional metrics like unemployment rates fail to capture these subtleties. The standard definition of unemployment—those actively seeking work but unable to find it—overlooks discouraged workers who have given up looking altogether. If included, the effective joblessness rate could be several percentage points higher. Similarly, metrics don't account for the "skills mismatch," where rapid technological changes in industries like agriculture and manufacturing leave workers with outdated qualifications struggling to adapt. Vocational training programs, while helpful, often lag behind market needs, leaving gaps that prolong underemployment.

This perceptual gap has real-world implications. For individuals, it erodes financial security and long-term planning, with many delaying major life decisions like buying a home or starting a family. On a societal level, it fuels inequality, as those in secure, high-skill jobs thrive while others languish. Businesses face challenges too: high turnover disrupts productivity, and a disengaged workforce can stifle innovation. Policymakers are urged to look beyond headline figures, perhaps by adopting broader indicators like the underutilization rate, which combines unemployment and underemployment for a fuller picture.

Looking ahead, there are glimmers of hope. As inflation moderates and interest rates potentially ease, economic activity could pick up, leading to more robust job creation. Government initiatives, such as subsidies for apprenticeships and regional development projects, aim to address skills gaps and boost employment in underserved areas. However, without targeted interventions—like strengthening labor laws to curb precarious work or incentivizing wage growth— the disconnect may persist. Workers' advocacy groups call for a reevaluation of how success is measured, emphasizing quality over quantity in employment statistics.

In essence, New Zealand's job market exemplifies a global trend where quantitative data doesn't fully reflect qualitative experiences. The numbers may suggest resilience, but the feelings of insecurity, underutilization, and stagnation reveal a more vulnerable underbelly. As the economy evolves, bridging this gap will be crucial for fostering not just employment, but meaningful, sustainable livelihoods that align with the aspirations of everyday Kiwis. Until then, the job market's true state remains a tale of two realities: one captured in spreadsheets, the other felt in the daily grind. (Word count: 1,028)

Read the Full The New Zealand Herald Article at:
[ https://www.nzherald.co.nz/business/economy/inside-economics-why-the-job-market-feels-worse-than-the-numbers-look/32UJ776DXZA6HFTB5B56DRFTMQ/ ]