John Key is very surprised that the unemployment rate jumped to 7.3 percent yesterday because he says other economic indicators are looking more positive.
Here's a possible explanation but I don't have time right now to thoroughly test it.
Well-publicised welfare reforms cause what I call an anticipatory effect. Many current beneficiaries know that they are going to be work-tested in the near future eg people on the DPB had their requirements tightened in October when those with a youngest child aged 5 were brought into the equation. Many know that next year they will be moved onto the new Jobseeker benefit.
People aren't helpless. They think about what having to take any job offered by WINZ might mean and they start looking for themselves. Hence, if they're part of the HLFS survey - the source for the official unemployment rate - they begin to describe themselves differently.
Two groups who have experienced significant increases are Maori and single parents, both disproportionately beneficiaries, so that supports my theory.
There were only 8,000 fewer jobs between the June and September quarters.
So the higher rate is not so much about people losing jobs but more about people becoming available for and seeking work.
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