New Zealand jobless rate holds steady as wage inflation climbs

NEW Zealand unemployment held steady in the first quarter while employment rose and wage inflation accelerated.

The jobless rate was unchanged at 3.4 per cent, Statistics New Zealand said on Wednesday (May 3) in Wellington. Economists expected a rise to 3.5 per cent. Employment gained 0.8 per cent from the previous three months, beating estimates, while wage inflation quickened to 4.5 per cent.

The tight labour market has been fuelling price pressures as employers lift pay rates to retain workers and attract new hires. The Reserve Bank of New Zealand (RBNZ) 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 labour market soften.

“Labour 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 labour 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 62.19 US cents at 11.19 am in Wellington. 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 per cent.

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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 4.5 per cent 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 per cent from the previous quarter.

Average ordinary time hourly earnings for non-government workers gained 2.1 per cent from the previous quarter and 8.2 per cent from a year earlier. That’s up from the previous quarter but down from a record 8.6 per cent annual reading in the third quarter of last year. BLOOMBERG