Unemployment looks to be getting worse
A model designed to give an early warning of a downturn in the economy is suggesting continued weakening in the labour market with an unemployment rate that may have already reached 4.8 per cent.
The Unemployment Rate–Nowcast (UR–Now) model developed by AUT Professor of Economics Tim Maloney and others is designed to give timely information about likely changes in the unemployment rate.
Professor Maloney says the model estimates the unemployment rate may have jumped to 4.8% in July, based on current underlying administrative data on increasing numbers of people on social welfare benefits and declining numbers of filled jobs.
“There have been recent predictions of pending recessions in New Zealand and many other developed economies,” he says.
“Unfortunately, lags in the release of the official unemployment rate prevent us from knowing what is currently going on in the labour market. This is why we built UR-Now – to provide early warnings of economic downturns."
The official unemployment rate is based on Stats NZ’s Household Labour Force Survey collected over a three-month period. By the time the data is released more than four months have elapsed since the start of the quarter.
“Updates on our UR-Now model over the next two months could provide an advanced indicator of a further weakening in the labour market and an even larger jump in this figure prior to the next scheduled release of the official unemployment rate by Statistics New Zealand in early November,” Professor Maloney says.
The recent Monetary Policy Statement from the New Zealand Reserve Bank forecasts a continuing weaking in our labour market, with the unemployment rate predicted to reach a maximum of 5.4% in a year's time.
Information about the UR-Now model can be found on the website for AUT’s Centre for Social Data Analytics.