BNZ on youth unemployment

The Bank of New Zealand takes on unemployment and inflation in its latest Economy Watch. They make a few points I've made before:

• The labour market was seriously overheated prior to the recession
• Youth unemployment is "staggering", especially when considered relative to the adult unemployment rate
• Youth employment fell as youths left the labour market
• "Issues that need immediate consideration are the impact of labour market regulations - in particular the costs and risks associated with the hiring of often unqualified youth - and the role and availability of apprenticeships and other quasi-tertiary education."

It would have been nice if they'd just come out and said "minimum wages" instead of "labour market regulations", but perhaps they're just shy of entering into policy debates.

They worry too that labour market slack, despite the downturn, isn't all that great; once things pick up, there will be fairly strong wage pressures (Moody's worries about that too). While the less-skilled end of the labour market might have more room than it currently appears if National winds up being serious about welfare reform, that wouldn't do much to increase labour supply in the more skilled sectors. I'd be curious to know the elasticity of cross-Tasman immigration with respect to relative unemployment rates: in particular, whether the elasticity depends on the direction of travel. It's fine for Kiwis to cross the ditch when markets here are slack, but we could have problems if it's harder to draw folks back once things pick up.