Unemployment numbers may not tell full story of business sector under growing pressure

The EMA says today’s unemployment numbers may not be telling the full story of what is happening in the economy given the pressure many businesses find themselves facing.

The latest numbers released by Stats NZ show that the unemployment rate increased from 3.9% to 4.0% in the December quarter.

EMA Head of Advocacy Alan McDonald says while this was better than expected, he suspects the picture is actually worse than the statistics show.

"These numbers are from the last three months of 2023. We know anecdotally that the economic situation has further deteriorated, and the real unemployment rate today is likely to be higher. The numbers released today don’t feel right.

"We are increasingly hearing from our members that the economic environment is becoming more and more difficult as increasing costs and rising interest rates are not only impacting consumer discretionary spending, but also increasing business financing costs," says McDonald.

"This has been reflected through a growing number of requests for help that we are receiving from our members, who are being forced to look at their staffing.

"Our AdviceLine, which provides specialist employment advice to our members, has seen the number of calls for restructuring and redundancy support surge by nearly 90% compared with this time last year. Similar inquiries surged in the last quarter of 2023.

"Our team were dealing with more than two calls a day in January from businesses who were considering redundancy and restructuring, which is deeply concerning given the start of the year tends to be one of the quieter months.

"It is important to remember that rising unemployment reflects business owners who are struggling and are having to let people go or to close."

McDonald says while inflation is beginning to fall, business conditions are likely to remain difficult for some time given interest rates are expected to remain elevated for much of the year.

"What business needs most now is the new government to have a laser focus on the economy, focusing on policy that brings inflation down faster and advancing policy that rebuilds both business and consumer confidence.

"After all, when business is doing well, the economy does well and that means more tax revenue for government to fund critical social services."