New Zealand unemployment held steady in the first quarter while wage inflation accelerated, suggesting the central bank is likely to press ahead with another interest-rate hike later this month.
(Bloomberg) — New Zealand unemployment held steady in the first quarter while wage inflation accelerated, suggesting the central bank is likely to press ahead with another interest-rate hike later this month.
The jobless rate was unchanged at 3.4%, Statistics New Zealand said Wednesday in Wellington. Economists expected a rise to 3.5%. Employment gained 0.8% from the previous three months, beating estimates, while wage inflation quickened to 4.5%.
The tight labor market has been fueling price pressures as employers lift pay rates to retain workers and attract new hires. The Reserve Bank is raising interest rates at a record pace to curb demand and predicts the economy will enter a recession this year, which should see the employment market soften.
“Labor cost growth was not as strong as expected, but still hit a record annual high with widespread lifts,” said Mark Smith, senior economist at ASB Bank in Auckland. “Both weaker demand and stronger supply should see greater labor market slack emerge over 2023, but the RBNZ is unlikely to shirk from further monetary tightening.”
The New Zealand dollar rose after the data to buy 62.30 US cents at 11:53 a.m. in Wellington, up from 62.13 cents beforehand. Swap rates climbed.
The RBNZ’s next policy meeting is on May 24 and most economists expect it to deliver a final 25 basis-point hike, bringing its tightening cycle to a close with the Official Cash Rate at 5.5%.
Migrant Inflows
New Zealand closed its border to foreigners for more than two years during the pandemic, cutting the supply of migrant workers many industries rely on. While inward migration is now surging, so is the recovering tourism industry.
“The resurgence of migrant inflows saw the working-age population rise by 0.5% over the March quarter, compared to zero growth a year ago,” said Michael Gordon, senior New Zealand economist at Westpac Banking Corp. in Auckland. “Even so, employment is still outstripping population growth.”
The 4.5% annual rise in ordinary time wages for non-government workers was the highest since the data was first published in 1993, the statistics agency said. The measure rose 0.9% from the previous quarter.
Average ordinary time hourly earnings for non-government workers gained 2.1% from the previous quarter and 8.2% from a year earlier. That’s up from the previous quarter but down from a record 8.6% annual reading in the third quarter of last year.
Details
- The participation rate rose to a record 72% from 71.7%
- Quarterly employment increased more than the 0.5% expected by economists
- Annual employment growth was 2.5%, up from a revised 1.6% in the fourth quarter and more than the expected 1.8%
- Statistics New Zealand said the underutilization rate, which is a broader gauge that includes employed people seeking additional hours, fell to 9% from 9.3% in the fourth quarter
(Updates with economists’ comments)
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