New Zealand Firms Reduce Demand for Labor, Hours Fall

By Tracy Withers

May 4 (Bloomberg) -- New Zealand companies reduced demand for labor in the first quarter, adding to signs a deepening recession will cause unemployment to rise.

Paid hours fell 0.4 percent from the fourth quarter, when they dropped 1.4 percent, seasonally adjusted, Statistics New Zealand said in its quarterly employment survey published in Wellington today. Filled jobs declined 2.6 percent and number of full-time equivalent employees decreased 2 percent.

Companies are reducing overtime and firing workers as sales drop amid the worst recession in more than three decades. Fewer jobs and hours worked add to signs that household incomes will decline for much of the year and the economy won’t emerge from the recession until 2010.

“As sales slip, labor demand has suffered,” said Doug Steel, senior economist at Westpac Banking Corp. in Wellington. “Even if the economy shows some sort of mild growth later this year, unemployment will keep going up.”

Business confidence was at a 35-year low in the first quarter and 36 percent of companies expected to fire workers, the most since 1991, according to a New Zealand Institute of Economic Research Inc. survey published April 7. Forty two percent said it was easier to find skilled workers, reducing pressure on wages.

The average number of overtime hours worked fell 1.6 percent from the fourth quarter, today’s report showed. From a year earlier, overtime hours dropped 13 percent.

Full-time Work

The number of full-time equivalent employees fell to the lowest level since the third quarter of 2007 and filled jobs declined for a second quarter to a two-year low. The falls reflected a seasonal decline in education workers during the summer vacation, the statistics agency said. There were also fewer people employed in manufacturing, construction, accommodation and restaurants.

Average ordinary time hourly earnings for non-government workers rose 1.1 percent in the quarter, the agency said. That’s almost twice the 0.6 percent median increase expected in a Bloomberg News survey of seven economists.

The agency publishes its main wage inflation indicator, the labor cost index, on May 6, and reports on unemployment on May 7. The jobless rate probably rose to 5.3 percent from 4.7 percent in the fourth quarter, according to the median forecast in a Bloomberg survey of 13 economists.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.