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    Essential Information on an Essential Issue

    Letter No.123

    12 May, 2000

    Our regular statistics summary for the latest quarter - March 2000.

    Comments on Wall Street's biggest one day crash in history

    The official unemployment rate has risen to 6.4% for the March 2000 quarter, up from 6.3% in December. The number of people employed has fallen 0.3%. These figures have surprised the financial markets which were expecting the unemployment rate to drop to 6.1%, and employment to rise by 0.5%. They represent a slow-down of the strong employment growth seen in the second half of last year. We include our regular Statistics That Matter feature in this issue of The Jobs Letter. Some highlights:

    — Most of the drop in employment has been in the loss of part-time jobs, where the December quarter's rise of 10,000 jobs has been reversed.

    — Full-time jobs, however, continued to rise by 5,000 jobs or 0.4%. This is the fifth consecutive increase in the level of full-time employment, bringing the level to an all-time high of 1,366,000 full-time jobs.

    — Over the last year, the overall level of employment has increased by 1.4% or 24,000 jobs, with male employment increasing by 16,000 and female employment by 8,000.

    — The working-age population was 2,889,600 at the end of March. This was up 6,100 from December and up 18,100 from a year ago. The number of people "outside the labour force" at the end of March was 1,002,000, up 5,000 from December, and up 9,000 from a year ago.

    — The two youngest age groups in the statistics recorded the highest unemployment rates in the last quarter. The 15-19 year age group now has an unemployment rate of 18.3%, and the 20-24 year of group has an unemployment rate of 11.9%.

    — The 15-19 year age group, however, has had a significant movement into employment (up by 7,100) in the last year. Its continuing high unemployment rate is explained by an increase in the labour force participation rate of these young people to 54.7%, a rise of 3.2%. In the last year the numbers of young people classified as "not in the labour force" is down by 8,300.

    — The highest regional unemployment rate at the end of March was in Taranaki (9.8%) followed by Northland (9.0%). The lowest unemployment rate was recorded in the West Coast/Tasman/Nelson/Marlborough region (4.9%) followed by Canterbury (5.9%)

    — Over the last year, the unemployment rates for each of the ethnic groups has decreased, with the most significant decrease being in the Maori group, which has fallen from 19% to 14.6%. In the last year, the numbers of Maori in the working age population has increased by 20,600, while the numbers of Maori in employment has increased by 25,500.

    "In spite of the recent volatility in part-time employment, the labour market remains relatively strong..."
    David Drage, ANZ Bank economist

    " The Government welcomes today's information because it reveals that unemployment is tracking at significantly less than for the same period last year. There is certainly no suggestion, from these figures, that there are any medium-term risks of the economy overheating.

    "Unemployment continues to be a blight on our younger population. This provides further evidence of the need for the Government's focus on providing opportunities for young people to upskill themselves for the modern workforce. Much more work has to be done in this area. The Government remains committed to reducing the rate of unemployment and this can be achieved without compromising our other economic objectives ..."
    Steve Maharey, Minister of Employment and Social Services

    " The unemployment figures revealing a rise in unemployment for the first time in 15 months are an early wake-up call for the Labour-Alliance Government. While the rise in fulltime employment is welcome - the outlook for the future is being thrown into uncertainty by the Government's policy programme.

    " Employers are saying they will be reluctant and unable to take on more staff as they grapple with the changes under the Employment Relations Bill, ACC reform and general policy uncertainty. The New Zealand labour market is already facing skill shortages without having the added rigidities this Government is imposing. This Government is turning a booming economy into a collapse in confidence among businesses..."
    Bob Simcock, National Party Employment Spokesman

    " With unemployment currently institutionalised in New Zealand, punitive measures such as work for the dole and means testing and suspensions of benefits are simply exacerbating a vulnerable and volatile sector of the society. These measures are making the problems of high unemployment worse and the Green Party wants the government to abolish them immediately.

    " Today's unemployment levels need to be addressed by a government committed to zero unemployment. This is not impossible and the government must begin now to make a substantial commitment to hands on employment creation..."
    Sue Bradford, Green Employment Spokesperson

    " This government seems determined to pay back its union masters through the Employment Relations Bill and paid parental leave, without considering the effect this has on young New Zealanders who will be denied their first job. The Alliance's election promise to young people was that no one would leave school and go straight on the dole. Jim Anderton could honour this by letting businesses grow and create jobs, but instead, he seems hell-bent on destroying any hope that our youth will succeed..."
    Clint Heine, President of Prebble's Rebels

    " The New Zealand University Students Association (NZUSA) rejects Act's senseless stance on youth employment, which fails to address the real issues concerning youth. We do not agree with Dr Muriel Newman's view that long term unemployed youth should be made to search for work 40 hours a week in return for the dole. The statistics of youth unemployment are distressing, however young people need real jobs and open educational opportunities ... and not to be used as pawns in petty politics.

    " Youth unemployment is a result of worsening employment opportunities and increasing barriers to our education system. After nearly a decade of being ignored, we hope that the new Labour-Alliance Government along with the Green party will put more time and energy into listening to the voice of New Zealand's young people and their concerns for their future..."
    Tanja Schutz, Co President NZUSA

    Sources - Statistics NZ Household Labour Force Survey March 2000 quarter; New Zealand Herald 5 May 2000 "Interest rates to rise as jobs fall off" by Brian Fallow; The Daily News 5 May 2000 "Unemployment figures increase" by Nick Venter; The Dominion 5 May 2000 "Unemployment climbs to 6.4%" by Nick Venter; The Daily News 9 May 2000 "Taranaki Unemployment worst in New Zealand" by Rochelle Warrander; Press Release 4 May 2000 Steve Maharey "Employment Trends Welcome"; Press Release 4 May 2000 Bob Simcock "Wake up call in job figures"; Press Release 5 May 2000 Prebbles Rebels "Government hits youth hardest"; Press Release: ACT New Zealand 4 May 2000 "Jobs Disappearing Under Labour"; Press Release: Green Party 4 May 2000 "Focus On Job Creation Urgently Required"; Deutsche Bank artcle 4 May 2000 "Household Labour Force Survey- Q1 2000"; Press Release NZ University Students Association 27 April 2000 "Act Sensationalises Youth Unemployment".

    The political and media spotlight is starting to turn to the high levels of youth unemployment. The Mayors Taskforce for Jobs have set youth unemployment as their top priority (see last issue), and the Act party and its youth group "Prebbles Rebels" are provoking debate on the "anti-business policies" of the government which are "having their worst impact on young people".

    Act employment spokesperson Muriel Newman points out that the youth unemployment rate for the 15-19 year old age group is at its highest level since 1994. Newman: "Labour Department advice to the new Government said that raising the minimum wage and the youth wage would increase unemployment. They said introducing the Employment Relations Bill would increase unemployment. They have warned that the Paid Parental Leave Bill will cause the loss of at least 1000 jobs, yet this Government continues with a legislative programme which they know will cost jobs. Unless the Government changes its anti-business agenda, rising unemployment and poor growth will be the norm. For the young people of New Zealand, that spells disaster..."

    Minister of Employment and Tertiary Education, Steve Maharey, accepts that the unemployment rates of young people is a critical concern, and he is focussing his attention on providing better skills for young unemployed. His goal: within three years, no young person will leave school without options in education, training or employment.

    This week Maharey spoke to the City of Manukau Education Trust (COMET) forum on school-to-work links . He reported that he is working on an education and leaving age strategy designed to encourage young people to stay in education and training until they have completed a formal qualification.

    Maharey: "The strategy I am working on will bring together a number of initiatives designed to prepare young people for a successful transition to adult life. We must ensure that we make available to these young people real opportunities to broaden their skills and to prepare themselves for lifelong learning and the world of work."

    The Maharey initiatives will include:

    — school to work business partnership programmes which give young people "live" experience in real workplaces

    — improved careers planning and advice

    — a review of the STAR programme to ensure that it effectively enables young people to begin nationally recognised qualifications while still at school, and

    — the establishment of a new Gateway programme which will increase the number of vocational and training options for senior secondary students.

    Sources - Press Release 9 May 2000 Steve Maharey "Young people in education and training until 18"; Press Release Act New Zealand 4 May 2000 "Youth Unemployment Highest since 1994"

    At the end of April, unemployment in the United States fell to 3.9% ... the first time in thirty years it has fallen below 4%. Joblessness in the US now also stands at its lowest peace-time level since 1957.

    Sung Won Sohn, chief economist of Wells Fargo & Co describes the rate falling below 4% as passing "a real psychological threshold". US economists are now worried that the job growth is pushing the outer limits of the pool of available workers, and this is also sparking fears that Wall Street will now have to contend with higher wages and higher interest rates.

    Sohn: "The amazing story of this recovery is that we've been able to find bodies to support economic growth so far. Workers have basically been coming out of the woodwork. We're using not just the traditional labour supply, but also prison labour, more mothers, more teenagers and the disabled. The economy has been trying to find as many bodies as we can, across the board, but its becoming more difficult..."

  • The strong US economy has succeeded in spreading the benefits of the robust job market to more American workers, with jobless Latino and African Americans at their lowest levels on record. The figures: The official unemployment rate for Latinos is now down to 5.4%, and for African Americans it is down to 7.2% — the lowest level in the 28 years that the government has been keeping these statistics.

  • Employers and employment agencies around the US continue to complain of labour shortages, and, in response, are changing their hiring strategies. Many employers are offering signing bonuses and stock options to attract new workers. Example: high-tech workers and mid-level bosses with good management skills are in great demand ... and a $10,000 signing bonus from a prospective employer is not out of the question.
    Sources - Los Angeles Times 6 May 2000 "US jobless rate at 30-year low of 3.9%"; Chicago Tribune 5 May 2000 "Many struggle to find positions in today's hot job market" by Stephen Franklin.

    Legislation establishing Industry NZ (INZ) as a crown entity was introduced to Parliament last week, fleshing out a few further details of Jim Anderton's "jobs machine". The legislation sets up INZ as the implementation arm of the government's economic development initiatives. The government has already announced that this new agency will be spending $100m a year in the next three years ... but we won't know how or in what form this money will be spent until announcements are made in the next Budget.

    The functions for the new agency are described in the legislation as:

    — managing the government's initiatives for industry and regional development

    — working with the Ministry of Economic Development to develop the detail of programmes

    — allocating funds and delivering services for industry and regional development programmes, and

    — facilitating co-operation and co-ordinating the delivery of government business assistance.

  • Jim Anderton says he won't be involved in the day-to-day running of INZ. But the legislation ensures that the agency will have to obey written directions from the Minister of Economic Development. These directions will have to be gazetted and tabled in Parliament.

    A Board for INZ of between five and nine people will be appointed by the Minister, and this Board will then appoint the chief executive. The Independent reports that the front runner for the job is Rick Hart who is currently acting as establishment manager. Hart has returned to NZ after doing a similar job in Victoria, Australia.

  • Pete Hodgson, Minister for Small Business, says that the Ministry of Economic Development has been moving as quickly as possible to build up new resources for economic development. Hodgson: "We've applied CPR to the few remaining officials with expertise in that area ... Contrary to what became the conventional wisdom in this country, it is possible for government to help businesses grow. Most other countries do it as a matter of routine and this country became something of a Western world freak when it abandoned all efforts."

    Hodgson is cautiously pointing out that INZ will not be getting into heavy and expensive intervention in the economy: "We're not going to spend huge amounts of money like Ireland to lure high-tech multi-nationals here. We're not going to put up a billion dollars in venture capital as Singapore has done. We're definitely not going back to the lunacy of Think Big and having something like the DFC speculating with public money on the property market. There is a middle way and a modern way in these things. We've learned from the past and our aims are modest. "

    Hodgson told the "Venture Capital" conference, run in New Plymouth last week by Venture Taranaki, that Industry NZ will be the agency government will use to help boost sources of venture capital. He outlined several ways this might be delivered, including straight venture capital investment; development finance; pooled development finance in partnership with the private sector; and "angel networks", which link small investors with small companies.

    Hodgson also reports that one of the first programmes Industry NZ will deliver is the Incubator Development Programme. This is designed to work with universities and local economic development agencies who are teaching innovators how to develop their ideas to the investment stage. Government officials have reviewed existing incubation services and found that support for start-ups was "thin" compared to other developed economies ... and Hodgson expects INZ to invest over $2m in these initiatives over the next year.

    Examples of business incubators have been springing up around NZ. The University of Otago and the Dunedin City Council are currently building the Centre for Innovation. The Canterbury Development Corporation's has ICAN, or Innovation Canterbury. Victoria University has the Innovation Greenhouse. Unitec in Auckland has a Centre for Innovation and Entrepreneurship and Massey University has an incubator at its Albany campus in Auckland. Typically, these incubators supply workspace on favourable terms and back the new ventures with various levels of business planning or managerial advice. The centres will often have office facilities available and access to finance, accounting and legal services.

    Source - Press Release NZ Government 4 May 2000 "Industry New Zealand Bill introduced"; The Independent 10 May 2000 "Jim's job machine cranks up" by Ian Llewellyn; Hodgson speech to Taranaki Venture Capital conference 4 May 2000 Plymouth International Hotel, New Plymouth.

    Deputy Prime Minister Jim Anderton and Finance Minister Michael Cullen have offered West Coast Mayors hope that the existing eight-year rimu contracts on the West Coast will run to their full term as part of the government's $120m development package for the region.

    This is quite a turn-around for Michael Cullen, as only eight months ago he was jostled and splattered with eggs at a pro-logging rally in Greymouth. Buller Mayor Pat O'Dea and Grey Mayor Kevin Brown now describe Dr Cullen as "a friend of the Coast" and have even offered to pitch in to buy Cullen a new suit. The job for Cullen and Anderton now is to put the case for the rimu contracts before their cabinet colleagues —in the face of adamant government policy commitments to stop all native forest logging on Crown land.

  • Representatives of the wood sector of the National Distribution Union have met with Jim Anderton to plead for the retention of the rimu contracts. The Greymouth Evening Star reports that union secretary, Jim Jones, is pointing to both the green movement and the timber industry as being "guilty of playing the emotional hand rather than dealing with facts". The union believes that sustainable management of Crown-owned native timber should be allowed ... pending an independent, well-qualified research report on whether the current regime of rimu harvesting was sustainable or not. Jones: "Timberlands has been recognised worldwide as having developed innovative sustainable harvesting techniques ... do we want to lose that?"

  • Native Forest Action disputes Timberland's claims that its logging operations are indeed sustainable. NFA: "The claims that logging North Okarito and Saltwater are "sustainable" have never been tested under the Resource Management Act or any public or independent process. The concept of sustainable, in terms of a forest's well-being, refers to ecological sustainability — the extent to which the forest will retain its ecological integrity and biodiversity. Timberlands have neatly redefined the term to refer to economic sustainability — the extent to which they can log the forest without destroying its potential to be logged in the future. It is a fraud. Felling and removing 10,000's of centuries old forest giants dramatically alters the ecology of the area. In terms of plant and birdlife the effects are far-reaching and non-reversible..."

    Native Forest Action is especially concerned that allowing the rimu logging to continue while also paying out a $120 million compensation package, amounts to the West Coast getting "both the money and the bag". NFA: "What is the point of giving $120 million to a region of 30,000 people unless there are major conservation gains for the whole country? $120 million is a hell of a lot of money — in the same league as the $170 million Ngai Tahu and Tainui settlements which were compensation for large areas of land and long-term and very major historical grievances. The only reason it is being offered to West Coasters is to bring the logging to an end. There would not be a package otherwise. It will look mad if the government gives all that money but still allows logging in forests that were supposed to be protected..."

  • The Furniture Association is also lobbying government to retain Timberland's supply of rimu ... which the association says is its mainstay timber and a unique point of difference for exports valued at $85m. The Association claims that if the government moves to curtail rimu logging on the West Coast, this will mean the loss of 4,000 jobs. (Furniture Association executive director Marcia Dunnett told The Independent that she arrived at the 4,000-job figure —which represents more than 40% of the industry's 9,592 workers — after "consultation with a couple of major industry players".)

    Native Forest Action says these job losses are being wildly over-stated. NFA: "New Zealand is not short of timber. There is a rapidly increasing supply of native timber from private forests, there are special decorative exotic timbers available for furniture and many furniture manufacturers are now choosing to use pine. Although Timberlands has orchestrated a few rimu users to lobby Ministers on its behalf, there has not been a single company that has said that it would have to reduce staff if Timberlands rimu ended. Of course companies using rimu would prefer not to change. But claims of thousands of threatened jobs are politically motivated and untrue..."

  • The end effect of stopping the rimu logging on jobs will depend on whether furniture manufacturers will use other timbers or leave the industry. Bruce Nimmo, a director of JL Lennard, supplier of specialty timbers, says the main NZ-grown alternatives for rimu furniture are macrocarpa, specialised joinery-grade pine and eucalyptus. Nimmo: "Most timbers are substitutable. The issue is really heritage and fashion." Nimmo notes however that, with the exception of pine, consistency and supply of alternative timbers is a problem.

    But the furniture industry does not presently use all the rimu currently on the market. Grant Carruthers, co-owner of Westco Lagan, processors of 90% of Timberlands' sawlogs, estimates that only 60% of his rimu supply goes to furniture makers, and the remaining 40% to outfitting kitchens, making door jambs and flooring. His sawmill plans to re-focus on pine next year — without a loss of jobs.

    Sources - The Christchurch Press 4 May 2000 "Cullen now friend of the Coast: Mayors" by Paul Madgwick; John Howard article 5 May 2000 "Time to end emotive bull over West Coast logging"; The Independent 10 May 2000 "Furniture makers demand Timberlands rimu resurrection" by Jo Mackay; Native Forest Action comments from website

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