Is this... stagflation?

Employment and hiring intention indicators have arrived thick and fast this week and some economists think we're past making line calls on what they mean for the year ahead

In today’s edition: Labour and National kick off their party retreats in Napier today; the jets were cooled in December; funding questions on Auckland’s light rail project; but first a decline in job ads and advertised salaries, ongoing labour shortages, the potential of stagflation and once again, immigration is set to be a key issue this year

Trying to keep up with economic and labour market news (Image: Getty)

Union renaissance may continue

Like me, you may feel like you’re on the end of an out-of-control ball machine following labour market, immigration and economic predictions at the moment. On one hand we have Trade Me data showing that advertised salaries and job ads are declining. We’ve then got Tuesday’s pretty awful business sentiment survey results that suggest hiring intentions for the year are down, all while labour shortages persist and the cost of living remains high. After a renaissance last year, unions may continue to be called to action unless, as BusinessNZ’s Paul MacKay suggests, wage growth keeps pace with the cost of living. Newsroom’s Andrew Bevan has a good run down on the year ahead for industrial action.

“Pretty much in recession already"

I headlined a Bulletin last year “The perverse bad news that is low unemployment”. Higher unemployment is a recessionary condition. We know hiring intentions will be an indicator of an upcoming recession and growing unemployment, a consequence. That is, in some ways, exactly what the Reserve Bank is looking for to get inflation under control. The New Zealand Institute of Economic Research business sentiment survey results (the pretty awful ones) have economists like Shamubeel Eaqub saying "I think we're pretty much in recession already".

“Stagflation on steroids”

A recession can not be technically qualified until we have two quarters of negative GDP growth, so June at the very earliest, but “recession-ish” or “recession vibes” have something of a self-perpetuating impact. Slowing business growth and the ongoing challenge of finding people to fill jobs, and therefore, the continued expectation of wage growth, prompted the BNZ to go beyond a mere “recessionary vibes'' call and say it was “all starting to look like stagflation on steroids''. I’ve covered what stagflation is near the end of this explainer on recessions but it’s persistently high inflation, high unemployment and slowing growth. 

Where will immigration settings land this year?

Across the Tasman, immigration is booming. Australian Treasurer Jim Chalmers said they now expect 2023 immigration to be much higher than the upwards of 235,000 people they originally forecast. As interest.co.nz’s David Chaston writes, “they are moving decisively to address their skill shortage”. Here, we’re still getting daily news about sectors desperate for workers. The government’s green list reversal at the end of last year had some suggesting it was backtracking on its immigration rebalance policy and floodgates were opening. However, as BusinessDesk’s Jem Traylen writes (paywalled) in a good assessment of where immigration policy might head this year, “the threshold for getting both short-time work visas and work-based residency is still higher than it was pre-Covid.”

In fair Napier, where we lay our scene

Both Labour and National are in Napier for their party retreats today and I can not be the only one with the thumb-biting scenes from Romeo and Juliet in mind. We’ve been told to expect announcements from both parties today, on top of the potential for announcements next week. There have been plenty of punts on what those might be (see below). Something of a distraction has emerged for National, however. The Herald’s David Fisher (paywalled) details some allegations of “dirty politics'' regarding National party candidate selection in Tukituki. Newshub’s Jenna Lynch asked Christopher Luxon about it at the airport yesterday and at this stage, Luxon is making the separation between party leader and party candidate selection processes quite clear. National party president Sylvia Wood has also been very firm saying "National’s selection processes are decided in line with our constitution and rules – not by the underhand tactics playing out in Tukituki by a small number of individuals and their proxies."

Extra for experts on the week of announcements:

• Toby Manhire on next week’s Big Wednesday

• The Herald’s Thomas Coughlan isn’t ruling out an election date announcement today (paywalled)

• David Farrar thinks more Labour MP retirements are coming

• “Luxon’s most likely gambit in Napier is a front bench refresh” - BusinessDesk’s Pattrick Smellie (paywalled) 

Jets were cooled

Electronic card spending data from Stats NZ yesterday suggests we did listen to Adrian Orr’s request to “cool the jets”. Retail card spending fell $166m – or 2.5% – in December 2022 compared with November 2022, when adjusted for seasonal effects. Stats NZ’s business performance manager Ricky Ho said the fall in spending was large for a December – and represented the first drop in nine months.

“Cold day in hell” says source on ratepayer funding for light rail

The Herald is reporting an Auckland council source saying that “it would be a cold day in hell before the mayor agreed for a cent of ratepayers’ funding to go into the project”. The project in question is light rail. A mayoral spokesperson said “those are not the words the mayor would use to express Auckland council’s long-standing position that light rail is a central government project, being driven and funded by central government”. Council chief of strategy Megan Tyler said at this stage, the council and Auckland Transport have not committed any funding to light rail, but government officials have initiated preliminary discussions about possible funding tools, which could include council contributions.

Click and collect

• Questions are being raised over fundamental work not done by the health sector transition unit

• Taranaki-King Country MP Barbara Kuriger has ruled out quitting politics, despite what Christopher Luxon called a “serious lapse of judgement”

• Fluctuating Uber pricing explained

• Microsoft to shed 10,000 jobs as tech sector braces for potential recession

• Helicopter crash in Kyiv kills 18 people including Ukraine’s interior minister

Got some feedback about The Bulletin, or anything in the news? Get in touch with me at thebulletin@thespinoff.co.nz.

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