The Incidence and Persistence of Cyclical Job Loss in New Zealand

In New Zealand, the impact of the 2007-2008 Global Financial Crisis (GFC) was milder than in most other developed countries, though still substantial, with employment declining by 2.5 percent between the fourth quarter of 2008 and the fourth quarter of 2009. There were pronounced declines in job and worker turnover rates, signalling a decline in labour market liquidity and difficulties for new entrants and high-turnover groups of workers (Fabling and Mare, 2012).

The current paper documents the extent and composition of employment change between 2000 and 2011, focusing particularly on the 2008-2010 period, when the labour market impacts of the GFC were strongest.

As in previous downturns, the incidence of cyclical job loss and unemployment has fallen disproportionately on young and unskilled workers. The paper identifies, for subgroups of workers identified by age, gender and earnings level, the sensitivity of employment growth and labour market flows to aggregate employment fluctuations and also to relative fluctuations across industries and local labour market areas. The rate of job accessions (hiring) is particularly sensitive to the economic cycle and most strongly for young workers.

Most of the differences across groups in the size of cyclical employment fluctuations are due to differing responsiveness to common shocks and not to exposure to different industry and local shocks.

Finally, the paper traces outcomes for workers whose jobs end, summarising their duration out of work and the wage increases or reductions they experience when they secure employment. Workers who left or lost jobs spent longer out of work after the GFC and settled for lower earnings growth when they did find a job. Both of these effects had partly but not fully abated within 3 years of the onset of the GFC.