October 12th, 2009 at 12:00 pm by David Farrar

A nice headline in the Herald about how the dole queue has dropped for the first time in around a year. However I would not read too much into it:

  • Firstly the HLFS is the better (and internationally) comparable figure of unemployment as it measures everyone available and looking for work regardless of if they are on the dole.
  • Some of the drop is because of the Government’s subsidies for young people. Now it is great this has got them into work, and off the dole, the effect may not be permanent.
  • There are seasonal issues, and over summer you gets tens of thousands of tertiary students seeking work

So I still expect unemployment to increase in the HLFS in Sep 2009 and Dec 2009 quarters. But maybe things will get better before late 2010.

But Business NZ chief executive Phil O’Reilly said the figure tallied with other evidence that employment might be picking up much sooner than the September quarter of next year, when current economic forecasts predict unemployment will peak at 7.5 to 8 per cent.

“There’s a good possibility of a permanent trend downwards from early next year,” he said.

That would be good.

Council of Trade Unions secretary Peter Conway agreed that the signs were that unemployment would peak sooner than next September and at less than 8 per cent.

He and Mr O’Reilly noted there had been no large-scale closures in the last few months, although there was a risk that some businesses might be forced under by the strength of the dollar.

Let’s just hope the US economy doesn’t implode, causing a W shaped recession.

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Bank economists

June 15th, 2008 at 9:18 am by David Farrar

After Michael Cullen attacked bank economists as talking up their own banks’ interests, the SST has looked at whether it is true. Extracts:

“It’s absolute bollocks,” says Westpac chief economist Brendan O’Donovan. If bank economists were seen to be always trying to talk their business up “and not talking the reality of the situation, then our credibility’s out the door and no one will listen to anything we say”. …

BNZ chief economist Tony Alexander says some of the policies he publicly espouses are not in the bank’s interests. He advocates a fixed interest rate levy, which increases whenever the Reserve Bank puts up interest rates. This effectively removes fixed interest rates. …

ANZ chief economist Cameron Bagrie says the material produced by the bank’s economists “is not the bank’s thinking. No, it comes out of the economics team led by myself but it’s not reviewed by a higher order of the bank”.

The team had to give its customers honest forecasts. Sometimes the bank management had “grimaced” at some of his statements. …

The bank economists’ case gets support from a perhaps unexpected corner Council of Trade Unions (CTU) economist Peter Conway. …

One reason the bank economists got a lot of media attention, Conway says, was that they were “very good”. They had a lot of resources and could quickly produce well-informed commentaries on a variety of subjects.

Bank economists clearly have some constraints on their freedom to speak, but so do other economists. Conway can’t publicly criticise the economic position of the CTU. Reporters, says Conway, need to “shop around” and get the views of economists from a variety of backgrounds.

In other words Dr Cullen was shooting the messengers.

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