Unemployment worries for New Zealand economy

Figures out today show that the unemployment rate increased by 0.5% from the previous quarter to 7.3% – see ASB Bank graph.. This was a concern considering the market expectation was a reduction of 0.1% to 6.7%. The main fall was in Auckland where employment fell by 2% and this should mean that new Reserve Bank Governor Graeme Wheeler will hold off on any increase until late next year. A reduction in the OCR is unlikely unless there is further deterioration on overseas markets.

Remember the types of unemployment

Frictional – The unemployment that inevitably results from the process of job-seeking. It will exist under conditions of generally so-called full-employment conditions (see employment, full), but it is not precisely clear what proportion of total unemployment can be called frictional.

Structural – Unemployment arising from changes in demand or technology which lead to an oversupply of labour with particular skills or in particular locations. Structural unemployment does not result from an overall deficiency of demand and therefore cannot be cured by reflation, but only by retraining or relocation of the affected work-force, some of which may find work at low wages in unskilled occupations.

Cyclical – Demand-deficient unemployment occurs when there is not enough demand to employ all those who want to work. It is a type that Keynesian economists focus on particularly, as they believe it happens when there is a disequilibrium in the economy.

Seasonal – Some workers, such as construction workers or workers in the tourist industry, tend to work on a seasonal basis. Seasonal unemployment tends to rise in winter when some these workers will be laid off, whilst unemploymnet falls is summer when they are taken on again.

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