25 March 2021
A year on from closing New Zealand’s borders and entering our first Covid-19 lockdown, DOT Loves Data has analysed New Zealand business performance to understand how the pandemic is impacting our economy.
A year ago New Zealand’s leading economists predicted unemployment could rise from anywhere between 4% to 30%. Those concerns haven’t eventuated, but we know 2021 will be a year of uncertainty until vaccinations are administered and our borders begin to re-open.
Several sectors are prospering off the back of a booming housing market, expanding government services, e-commerce and investment in shovel-ready infrastructure projects. However, the recovery is K-shaped because tourism, accommodation, international education, youth employment and non-homeowners/renters are suffering.
Unemployment impacts during the GFC compared with the Covid-19 Pandemic
During the Global Financial Crisis New Zealand’s overall unemployment rate between 2007 and 2012 rose from 3.5% to 6.5% for all workers, and from 13.1% to 27.6% for 15-19 year olds.
In the September 2020 quarter, the number of unemployed people rose by 37,000 to reach 151,000, the largest quarterly rise in unemployment since recording began in 1986. Interestingly, the next largest rise in a single quarter was recorded in the June 2009 quarter during the global financial crisis, when the number of unemployed people rose by 18,000.
To the surprise of many, the number of employed people rose by 17,000 over the December 2020 quarter due to the extensive wage subsidy programme and an enhanced sense of future confidence.
Levels of confidence in job security improved since the September 2020 quarter, with 79.1 percent of people confident of retaining their jobs or business in December 2020 in the next 12 months, compared with 74.3 percent in the previous quarter.
What does the level of company closures tell us?
Company closures and growth rates are a strong indicator of business resilience and recent increases in company closures and liquidations show that business resilience is continuing to be tested by the Covid-19 pandemic. From September to November 2020, when the initial wage subsidy program ceased, a 127% increase in business closures was observed, compared with the same period in 2019. In total, 16,234 businesses closed between September – November 2020 compared with 7154 in September - November in 2019.
Interestingly, for the same time period, new businesses being opened also increased by 28%, indicating that despite the net drop in business growth, some sectors were performing well. The number of business openings from September - November 2020 was 19,906, compared with 15,560 in September - November in 2019.
Number of business closures
Business closures by industry (August – November 2020)
Business closures by region (August – November 2020)
How does this compare with the Global Financial Crisis?
When we compare these figures against the GFC, business closures peaked at 20,853 between July and September 2011. Interestingly, it had taken more than three years for the GFC to fully impact the number of business closures. This was an 850% increase in business closures compared with July- September 2010, when 2194 businesses closed.
There have been 2821 liquidations in NZ in the year since 23 March 2020.
While the annual level of liquidations is trending upwards, we're not yet close to the peak reached of 600 liquidations in the single month of April 2009.