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New Zealand jobless rises, wage growth low as workers flood market
[WELLINGTON] New Zealand's jobless rate jumped and wage growth stayed sluggish as more people flooded the workforce in the fourth quarter, suggesting interest rates can remain at record lows even as the economy hums along.
Unemployment rose to 5.2 per cent, up from an eight-year low of 4.8 per cent the previous quarter, as participation grew to record levels, Statistics New Zealand said on Wednesday.
The data sent the New Zealand dollar down to US$0.7302, off near-10-weeks highs around US$0.7345, as the market pared back the chance of a rate hike later in the year.
"The figures are certainly not weak - labour demand remains strong. But until clearer evidence of stronger wage growth emerges we doubt the RBNZ (Reserve Bank of New Zealand) will want to front-run a tightening cycle," said Cameron Bagrie, ANZ chief economist. "Hikes still look more likely to be a 2018 story."
Wage growth was very muted with 0.4 per cent quarterly growth and an annual rise of 1.6 per cent.
That could weigh on the RBNZ's inflation outlook. The consumer price index has only just made it back into the central bank's target band of 1 to 3 per cent after undershooting for two years.
Key to this moderation has been record levels of migration which has expanded the workforce faster than jobs could be created. As a result the participation rate rose 0.4 percentage points to its highest-ever level of 70.5 per cent.
Employment climbed 0.8 per cent as 19,000 jobs were added to the economy, largely driven by the booming tourism and construction sectors.
"People are entering the labour force at a faster pace than the increase in population, and it appears employment opportunities are not able to quite keep up with the increasing demand for jobs," said Kiwi Bank chief economist Zoe Wallis.
The RBNZ's next policy announcement is on Feb 9 and it is considered certain to keep rates at 1.75 per cent given economic growth has been among the highest in the developed world.