Employment has fallen over the last year, as businesses across New Zealand have seen lower sales and falling business activity, and moved to right-size their workforces for the work on offer. But the fall in employment hasn’t been spread evenly across all industries, with some seeing a steeper drop in activity and a steeper drop in jobs.

In this article, we analyse how job changes have occurred across industries in New Zealand over the last year, and what might happen in the future.

In April 2020, as New Zealand entered the COVID-19 Alert Level 4 lockdown, Infometrics published a rapid assessment of the possible employment effects of the worst pandemic in a century. Our analysis feared over 250,000 jobs could be lost without significant government support to limit job losses and business failures.

Instead, substantial government support in the form of the Wage Subsidy (and its various iterations) and a number of other supports limited job losses to just under 31,000, with most job losses at an aggregate level occurring early on in the pandemic. Seasonally adjusted monthly filled jobs showed around 30,700 fewer jobs in April 2020 compared to December 2019. By March 2021, roughly a year on from the pandemic hitting the New Zealand economy in a widespread way, monthly filled jobs were sitting 0.5% higher than a year earlier.

During the pandemic period, economic activity was curtailed in various ways, and to various degrees for different industries. The closure of the borders meant that tourism-based industries were hit hard, particularly transport activity, while low interest rates from the Reserve Bank stimulated a substantial increase in construction activity.

As is clear now, the stimulus needed to support the New Zealand economy remained too supportive for too long, producing stronger and stronger demand when supply was curtailed by the pandemic. More demand than supply generated the strongest rates of inflation seen in a generation, and in response to this high inflation, interest rates were ratcheted higher to dampen demand and restore more of a balance to the economy.

These choices have created the conditions currently being experienced by the New Zealand economy, and with demand restricted to limit pricing pressures, inflation has fallen back to target levels. But this lower demand has also meant some businesses had staffing levels to service a higher level of sales and activity than is currently being experienced, and so the labour market has weakened. Job ads in the economy have fallen a massive 59% since the peak of job ads in July 2021, and the unemployment rate has started to rise. Infometrics analysis of monthly filled jobs data from Stats NZ, up to September 2024, shows a fall in employment of around 20,800 roles, or a 0.9%pa drop.

This drop hasn’t been felt equally, with construction the hardest hit industry so far. In September 2024, there were 197,700 filled jobs in construction, around 10,300 fewer than a year ago (see Chart 1). Concrete volumes and building work put in place have all fallen compared to a year earlier, and with less work to be done, fewer construction workers are needed.

Administrative and Support Services has had the second largest decline in job numbers, falling by around 7,100 from a year ago, with this industry containing labour hire and employment and recruitment services, all of which have seen clearly lower demand for recruitment and temporary or contractor workforces. Accommodation and food services is the third-largest declining industry, with around 6,100 fewer roles in September 2024 compared to a year ago, as domestic tourism activity reduces and the international tourism recovery stalls below 100% pre-pandemic recovery.

Health employment has bucked the trend, with an increase of nearly 10,600 filled jobs in September 2024 compared to a year ago, with demographic pressures of a larger and ageing population requiring more people to support demands on the health system. Education had the second largest increase, up around 3,200 roles from a year ago, due to both population growth but also the weak labour market – generally, when the labour market deteriorates, more people look to reskill through education.

It is interesting to compare the industry-level job movements for both the COVID-19 pandemic and the recent economic slowdown, brought on by higher interest rates to combat inflation. Chart 2 shows many similarities between the two periods.

Large job falls were experienced in both periods for a number of industries, including manufacturing, retail and wholesale trade, accommodation and food services, and administrative and support services. Although the trend might be the same for these industries, the drivers are different.

Lower retail and accommodation and food services employment during the pandemic was closely linked to the absence of international tourism, while domestic tourism was strong as Kiwi travellers couldn’t travel overseas and instead explored more of their own country. Whereas at present, international tourism is occurring again (although hasn’t fully recovered), but domestic tourism activity is lower as higher inflation then higher interest rates forced households to curb spending, with travel a key area to cut back on. Administrative and support services fell during the pandemic due to a large fall in travel agency and tour arrangement work, compared to recently when labour hire employment has fallen more.

Other industries have seen completely opposite movements. Construction employment rose considerably during the pandemic as low interest rates stimulated substantial increases in home building, with a record of over 51,000 residential building consents in a year. More recently, higher interest rates have had the opposite effect, seeing building consents falling back towards more usual, pre-pandemic levels of around the 30-35,000pa mark. Professional services employment also grew through the pandemic but has fallen back with demand, exacerbated by cuts in government spending on consultants and contractors.

Transport employment fell during the pandemic as transport activity fell, particularly for international air travel. However, at present, international air travel is still recovering, meaning employment is higher than a year ago in this industry. Retail trade employment has fallen more in the last year than the level of decline seen during the pandemic, with higher interest rates forcing households to prioritise household funds towards paying the mortgage and allowing less for general shopping.

Public administration employment rose substantially during the pandemic period, as the government of the day both increased resources to support the country during the pandemic, and also to support more government initiatives during the period as well. More recently, a change in government has seen a number of cutbacks to the public sector, which has seen growth in the wider public administration slow to a trickle.

Some of the job changes seen in different industries are expected to be more temporary. As interest rates fall and households spend more, economic activity will rise and more people will be needed to service this higher level of demand. Industries like retail trade, professional services, administration and support services, and accommodation and food services should all see a recovery over time, as more spending by households and businesses supports more job opportunities.

But other job reductions may be more permanent. The higher spike in energy prices this year has added to uncertain operating conditions and poor profitability for some manufacturers, and the closure of a number of mills across the North Island will not be reversed. Lower media job numbers might also not improve strongly or go back to the same levels as before, as the advertising and marketing landscape shift towards digital options, making for leaner revenue for media while operating costs remain high. Construction employment might also not reclimb to the lofty heights it once attained, with more usual interest rates unlikely to support a return to the record-high levels of construction that required such an uplift in employment.