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New Zealand job growth falls in Q2, reinforces central bank's neutral stance
[WELLINGTON] Job creation in New Zealand unexpectedly slipped in the second quarter and wage growth loitered, official data showed on Wednesday, adding weight to the prospect of the central bank keeping rates on hold at record lows for years.
The job creation rate fell by 0.2 per cent in the three months to end-June, data from Statistics New Zealand showed, versus analysts' forecasts of a 0.7 per cent rise.
Quarterly wage inflation remained at a sluggish 0.4 per cent, but was up 1.6 percent on an annual basis and in line with economists' expectations.
The surprise contraction in job growth and listless wage inflation spooked investors, sending the New Zealand dollar to a one-week low of US$0.7426 from around US$0.7466 before the data was published.
The unemployment rate slipped, in line with expectations, to 4.8 per cent, a level last hit in the third quarter of 2016, which was then an eight-year low.
Economists said the fall in unemployment was largely due to the participation rate slipping 0.6 percentage points to 70 per cent, meaning the overall pool of people looking for work was smaller and there were more jobs to go round.
The Reserve Bank of New Zealand (RBNZ) has expressed concern that robust economic growth and industry complaints of labour shortages in high-skilled sectors such as technology and construction, have not led to broad-based growth in wages.
Wage growth has remained stubbornly low, and at 1.6 per cent was lower than annual consumer price inflation of 1.7 per cent in the second quarter.
"This release reinforces the idea that the RBNZ will be in no rush to raise interest rates any time soon," said Nick Tuffley, chief economist at ASB Bank.
"There is just not a lot of sign of wage inflation coming through and you have also got that question mark being raised over the weak employment growth after two quarters of moderate GDP growth," he added.
The RBNZ, which is due to meet on Aug 10 for a monetary policy decision, slashed rates throughout 2016 to record lows of 1.75 per cent in November and has signalled it will keep rates on hold, possibly until 2020, to boost inflation.