Falling unemployment a challenge for franchising?

The unemployment rate fell to 5.3 percent in the December 2015 quarter (from 6.0 percent), with16,000 fewer people unemployed than in the September 2015 quarter. Unemployment fell for both men and women, with the unemployment rate for men falling 0.5 percentage points (to 5.0 percent) and that for women falling 0.8 percentage points (to 5.7 percent).

'Although the number of employed people has risen, there was also growth in the number of people not participating in the labour market,' labour market and households statistics manager Diane Ramsay said. 'This has contributed to labour force participation falling for the third quarter in a row.'

Over the December quarter, employment grew 0.9 percent, after falling in the previous quarter. This has resulted in annual employment growth of 1.3 percent.

'Employment has been especially strong for 20- to 29-year-olds, with 26,800 more people employed in this age group over the year,' Ms Ramsay said. 'There were also just over 23,000 more people employed in Auckland over the year. The largest rise in employment was within Auckland’s construction industry.'

Annual wage inflation, as measured by the labour cost index, eased to 1.5 percent, the lowest since the year to the March 2010 quarter. This compares with low annual consumer price inflation of 0.1 percent.

What it means for franchises

Lowering unemployment is a mixed blessing for franchisors and franchisees. Ease of employment - or re-employment - is a factor in people choosing to explore business oportunities, so high employment levels reduce the pool of potential franchisees. The quarterly Franchising Confidence Index shows this has been a concern for franchisors for some time, meaning they have to offer more attractive packages and promote them more heavily if they are to develop new areas.

For franchisees, higher employment should mean people have  more money to spend, which is good news. However, it also makes it harder to find suitable staff - something which has been a concern for the last two or three years.

Although analysts say that record levels of immigration could alleviate skill shortages, much depends upon the language skills of new arrivals. A 2011 study found that English literacy can have a major impact upon franchisee performance. However, the news that New Zealand is currently enjoying net immigration from Australia for the first time in 24 years may open up some interesting opportunities for franchisors.