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Tuesday, March 16

Economic recession drives productivity decline in 2009


Labour productivity fell 1.5 percent in the year to March 2009, Statistics New Zealand said today. The decline in labour productivity was driven by the fall in output – that is, real GDP – of 2.2 percent, while workforce hours fell 0.7 percent.

The recent decline has not significantly affected the long-term trend, with labour productivity growing by 1.9 percent annually since 1978.

"Productivity declined in the March 2009 year as the New Zealand economy went into recession. There was a large drop in output, with labour taking longer to respond to the fall in demand. This led to a significant fall in labour productivity," economic statistics development manager Jude Hughes said.

The output decline in the March 2009 year was driven by falls in the manufacturing and construction sectors. The labour market weakened during this time as the unemployment rate increased to 5.0 percent by the March 2009 quarter and firms reported that finding staff was easier than it had been for more than 30 years.

The long-term trend of more capital being available to each worker continued in 2009. Capital investment increased steadily, up 3.3 percent, while workforce hours declined. Looking at labour productivity from a different angle, additional capital helps workers boost their productivity. 

However, in 2009 this was more than offset by factors such as process or knowledge improvements – known as multifactor productivity – which fell by 3.1 percent. Overall, labour productivity declined.

The productivity measures cover the part of the economy referred to as the ‘measured sector’. Industries excluded are government administration and defence, health, education, and commercial and residential property services.