Vacancies, unemployment and labour market slack in New Zealand

This Analytical Note explores how we can use the Beveridge curve and matching function to analyse New Zealand’s labour market. The Beveridge curve shows the negative relationship between the number of job vacancies and the number of people unemployed. In New Zealand, the Beveridge curve shifted out after the Global Financial Crisis in 2008, indicating the labour market may have become less effective at matching those out of work with vacant positions. The matching function tells us to what extent vacancies and unemployment drive job-creation. In 2019, job creation In New Zealand slowed sharply which the framework attributes in part to the low level of unemployment – firms simply could not find workers to fill vacancies. This is consistent with the Reserve Bank’s assessment at the time that employment was at, or slightly above, its maximum sustainable level. The matching function also confirms the finding from the Beveridge curve that the labour market has become worse at matching job-seekers and vacancies. This could explain why unemployment in the last decade did not return to pre-2008 lows.