Westpac economist warns a plan-of-action is needed to manage the end of the Canterbury rebuild as thousands of jobs run their course

Westpac economists expect around 14,000 construction jobs to be lost in Canterbury over the next few years as the rebuild winds down.

The rebuild has plateaued and activity is set to drop off over the next 18 months or so.

Residential activity is falling sharply and non-residential and infrastructure and civil projects are expected to wrap up by 2022.

Westpac warns a serious plan-of-action is needed to manage the impact this downturn will have on those employed in the construction sector, as well as the wider regional economy.

Crunching the numbers: locals to take the punch

Westpac’s analysis suggests most the workers who have added to the construction sector expansion are locals, rather than migrants.

Westpac industry economist, David Norman, says 22,000 workers were employed in Canterbury following the February 2011 earthquake.

Around 14,000 of these took up jobs in the construction industry, which saw the size of the local construction workforce nearly double.

Westpac maintains the vast majority of the 22,000 workers came from within Canterbury.

Official data shows the unemployment rate in Canterbury dropped from 5.5% in March 2011, to 3.4% in March 2014. In other words, 6,200 people living in Canterbury who didn’t have jobs in 2011, found jobs by 2014. This accounts for 28% of all job growth in the region over this time.

The labour force participation rate also grew to 72% from 70%, meaning 7,600 people who weren’t in the labour force in March 2011, had joined by 2014. This accounts for 35% of all new workers in Canterbury.

Furthermore, natural population growth saw around 3,900 new workers added in Canterbury, as people reached working age and entered the workforce. Westpac estimates this accounts for 18% of all new workers.

Westpac acknowledges overseas migrants also added people to the workforce.

Based on the fact net overseas migration into Canterbury was 3,700 in the three years to March 2014, Norman estimates 2,500 new workers from overseas were added to the labour force. This makes up 11% of all new jobs created in Canterbury since the quakes.

Norman says these calculations leave only a net 1,800 workers (8% of all new jobs) that likely came from other parts of New Zealand. He notes there is low mobility of construction workers between regions, confirming the point that relatively few of the new construction workers in Canterbury are likely to have come from other parts of New Zealand.

Furthermore, Westpac says data on industry level employment suggests that not many people shifted into construction from other industries.

9,000 construction industry workers expected to be jobless and remain in Canterbury   

Norman has pulled all these figures together to estimate that as construction activity returns to normal levels, 9,000 construction industry workers will be left jobless and probably won’t relocate if current mobility trends continue.

He comes to this figure assuming migrants from outside Canterbury will relocate and a very small number of construction industry workers will be able to shift back into other industries.

He notes this will create “significant downward pressure on Canterbury economic growth”.

On the upside, Norman says we know what to expect, so can plan ahead accordingly.

He says businesses need to kick into action and figure out how they’re going to cope with the downturn.

Central and local government agencies need to work with local industries to encourage inward investment and develop other industries.

Norman says Christchurch needs to diversify, as in many ways it’ll be a brand new city when the rebuild is complete.

Finally, he maintains government agencies and the private sector should be taking practical steps to increase worker mobility, both geographically and occupationally. This could include upskilling or job fairs where regions short of workers can recruit staff.

Norman says we also need to think about how we can make it easier for workers to relocate to areas of high demand, like Auckland, particularly with regard to housing.