A new model suggests NZ's unemployment rate could soon top 5 percent. Photo: 123rf.com
New Zealand's unemployment rate may have already reached 4.8 percent, and could hit 5 percent by the end of the year, an economist says.
AUT economics professor Tim Maloney has developed a new model that gives more timely information on likely changes in the rate.
Stats NZ only updates the rate each quarter, whereas Maloney's model provides a monthly reading.
"We collect data from the past to indicate what the unemployment rate is but by the time we look at it, that quarter is already gone.
"To make good decisions, we need to know currently what the unemployment rate is, what the state of the aggregate economy is."
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Maloney said the UR-Now model estimated the unemployment rate might have hit 4.8 percent in July, based on data on benefits and filled jobs.
"There have been recent predictions of pending recessions in New Zealand and many other developed economies.
"Unfortunately, lags in the release of the official unemployment rate prevent us from knowing what is currently going on in the labour market. This is why we built UR-Now - to provide early warnings of economic downturns."
The Reserve Bank expects the unemployment rate to peak at 5.4 percent in a year's time, but Maloney said it could reach that level sooner.
He said it would be expensive for Stats NZ to update the unemployment rate quarterly with its current method, but his model was a more economical method.
"This was born out of the Covid situation, where we were looking at large swings in the performance of the economy and the unemployment rate.
"At the time when I was working in Wellington, I said it's fairly easy to use administrative data to have a nowcast of what the unemployment rate is... we don't have to wait for three or four months."
Maloney said the rate was clearly going up toward the Reserve Bank's forecast peak.
"We're getting there a lot faster than a lot of people would expect... I think there's clearly evidence the labour market is weakening, the economy is slowing down.
"It could be that we'll get to something like the low 5 percent to mid-5 percent before a year from now.
"It might be by the end of this quarter or early 2025 [when] we're in the 5 percent range. This is just alerting public and private decision-makers that the economy is weakening a bit faster than we expected."