The latest quarterly Westpac McDermott Miller Employment Index shows employment confidence has hit its lowest level in over two years.
The index fell 4.6 points in the December quarter, from 104.2 to 99.6. This is its lowest level since June 2009 when it stood at 96.1.
A level over 100 indicates overall optimism, below 100 indicates pessimism.
The results were most dismal in the section which asks people about expected job conditions in the wider economy. On balance 9 per cent of respondents now think that national job prospects will worsen over the coming year, a sharp turnaround from their previous cautious optimism.
The results were consistent with the bank’s recent consumer confidence index which also fell sharply in the December quarter, Westpac senior economist Felix Delbruck said.
”It’s a sign that the clouds of the global economy, particularly the crisis in Europe, is starting to affect sentiment here.”
But Employers and Manufacturers Association chief executive Kim Campbell does not share the pessimistic outlook.
He agreed that while American economic data was heading in the right direction many of the underlying problems which caused the global financial crisis had not been addressed, and the eurozone still had a long way to go in resolving its debt crisis.
”These two clouds are reasonably big.”
But New Zealand had hitched its wagon to growth in China and Australia, and had the ability to produce food which was in global demand.
”New Zealand is in many respects in quite a sweet spot. There was modest growth last year, and there is nothing to say that won’t continue.”
Unemployment in this country tended to be specific to certain demographics and regional areas, and was not worsening.
New Zealand was over surveyed and some of the survey results started to feed on themselves, he said.
Westpac’s Delbruck said the index painted a slightly more pessimistic picture of the labour market in the coming year than the bank held itself.
The detail showed the effect of the European crisis on the sentiment coming from farming and export sector respondents.
The gloomy outlook was also obvious in Wellington, where public sector employees felt the threat of the government’s budget cuts.
This softening in economic confidence could lead to a drop in spending in the first quarter of 2010, Westpac said.
The Employment Confidence Index asks people about current and expected job availability and about their personal employment situation.
The results showed households were primarily becoming more concerned about employment conditions in the wider economy, rather than their own situation.
The increasing gloom was offset by an improvement in reported earnings. The balance reporting an increase in earnings over the past year rose from 21 per cent to 29 per cent. However this was still below pre-recession levels when this figures averaged around 40 per cent, the bank said.
A regional breakdown of the index shows employment confidence is now in negative territory in all regions except Auckland, Canterbury and Southland.