This year seems to be shaping up as an annus horribilis for employment, as we receive seemingly hour-by-hour updates on job losses. In this article, we start by looking at just how bad our previous bad years for employment were, see how significant this year’s announced job losses are at a macro scale, and how these losses play out for different industries. Finally, we touch on our expectations for employment growth and the role of net migration as a relief valve.

Casting over the employment trend of the past 35 years in New Zealand (Chart 1) shows an overwhelming picture of growth, with employment having risen from 1.6m in 1986 to 2.9m in 2023. At the same time, unemployment rates have trended down and labour force participation has risen. Most quarters with negative growth are small blips, with the exception of several more marked downturns.

The late 1980s are New Zealand’s darkest period for employment growth on record, with employment falling by a cumulative 7% between December 1987 and June 1989, spurred on by corporatisation in the public sector, the 1987 share market crash, and the removal of import tariffs affecting domestic manufacturing. Over this 18-month period, net job losses averaged 1,282 per week. Full recovery after this concentrated period of job losses was patchy, and employment didn’t surpass its 1987 peak until September 1994, seven years later.

The next major loss of jobs occurred in the Global Financial Crisis (GFC), with employment falling by a cumulative 2.7% between December 2008 and September 2009, an average loss of 1,513 jobs per week over nine months. Full recovery was achieved by June 2012, three years later.

Heading into the COVID-19 pandemic, we also saw brief, but considerable job losses, with employment falling by a cumulative 1.1% between March 2020 and September 2020, an average loss of 1,192 per week over six months. The history of this is fresh in most people’s minds – we went from expecting a deep recession to living in an over-stimulated expansion, and employment fully recovered by March 2021. This assessment of the overall picture belies the unevenness of job losses at an industry level, with for example, the rapid rise of construction jobs in late 2020 unlikely to have been much help to former international airline pilots.

Recent announcements of job losses have been concentrated in the public sector, media, and construction.

Public sector job losses announced to date tally up to over 1,000, and although this total does include some long-standing vacant positions, further announcements are to be expected as the government seeks a 6.5% to 7.5% cost saving in the ”back office”. Employment in public administration and safety, which includes a mix of frontline and back-office staff, rose by a considerable 33% over the past five years. Surprisingly, employment growth has continued even in recent times, with an 8.6%pa rise in the December 2023 quarter.

Although central government is focused on achieving cost reductions ahead of the May Budget announcement, we could see some losses in local government too. Councils are currently consulting on their annual or long-term plans, with many proposing reduced levels of service, such as shorter operating hours at libraries or pools, to mitigate the impact of cost escalation in essential activities on rates.

Like the public sector, the construction sector has expanded considerably, with employment up 36% over the past five years. The construction sector is made up of thousands of small businesses and contractors, so we wouldn’t expect job losses to make the headlines, although the financial difficulties and collapses of developers and head contractors certainly point to tougher times. We have already seen a pullback in construction employment, down 1.5%pa in the December 2023 quarter.

Unlike the public sector and construction, the information media and telecommunications industry hasn’t been in expansion mode, with employment falling 2% over the past five years, although it did notch up 3.3%pa growth in the December 2023 quarter. In the past week, over 300 job losses were announced across Warner Bros. Discovery and TVNZ, amounting to 0.9% of industry employment. Sharp declines in advertising revenue for traditional media are likely to heap pressure across the media sector, reducing the opportunity for those who have lost their jobs to remain in the sector.

Announced job losses across the public sector, construction and media only represent a portion of the overall impact, as it’s likely that job losses for smaller firms and contractors servicing these industries are taking place too, but aren’t newsworthy on their own. Over the coming months, as announced job losses are cemented, we expect to see these cuts flow through in employment statistics, as well as earnings (reflecting both fewer jobs, and fewer hours for some of those still in work).

It’s important to acknowledge the devasting impact of these job losses on workers and their families, and the potentially long-lasting effects of being unable to put their skills to use – whether those effects lead to people changing careers or leaving the country altogether. However, at a macro scale, the job losses announced of late are more commensurate with a bad week than a full-blown recession. The 1,300 job losses announced across the public sector and media are less than the 1,513 jobs lost on average per week over a nine-month period during the GFC in 2009.

News of further job losses is likely to come through over the rest of the year, as organisations continue to cut their cloth in response to the economic downturn. The net effect of these job losses will depend on how quickly new jobs can spring up in other organisations and other industries. Our expectation is that overall employment growth will be positive, but negligible over the rest of 2024, although there are clearly risks to the downside as job losses mount.

One of the key relief valves for a downturn in employment is net migration. During the GFC, we experienced a net migration loss of 16,300 New Zealand citizens from December 2008 to September 2009, an average of 417 per week.

In 2023, we experienced a net loss of 44,500 New Zealand citizens, an average of 857 per week. At the same time, overall net migration reached a record high of 139,100, buoyed by arrivals of non-New Zealand citizens. The non-citizens arriving likely bring with them different skillsets, entering jobs which New Zealand citizens aren’t willing or skilled to fill. The likes of journalists and policy analysts who lose their jobs face a stark choice – find a job in their specialty overseas, or shift their focus to other local opportunities, which might require a period of retraining or a stepdown in pay.

The net inflows of non-citizen migrants are likely to taper off over the coming year, as falling job ads suggest a lesser need to bring in workers. However, the net outflows of citizens could remain, especially if those losing their jobs choose to take their skills overseas.