New Zealand unemployment climbs, wage inflation accelerates

NEW Zealand wage inflation accelerated in the fourth quarter but the jobless rate unexpectedly edged higher and employment growth missed estimates.

The jobless rate climbed to 3.4 per cent from 3.3 per cent, Statistics New Zealand said on Wednesday (Feb 1) in Wellington. Economists expected it to remain at 3.3 per cent. Employment rose 0.2 per cent from the previous three months and annual wage inflation quickened to 4.3 per cent.

An acute labour shortage has been fuelling price pressures as employers lift pay rates to retain workers and even offer sign-on bonuses to attract new hires. The Reserve Bank of New Zealand (RBNZ) is raising interest rates at record pace and predicts the economy will enter a recession this year, which may see the labour market soften.

The RBNZ’s next policy meeting is on Feb 22, with economists split over whether it will deliver another a 75 basis-point hike or revert to a 50-point increase. The bank has lifted the Official Cash Rate by four percentage points since October 2021, taking it to 4.25 per cent.

The New Zealand dollar fell, buying 64.40 US cents at 11.10 am in Wellington from 64.63 US cents immediately before the release. Investors trimmed bets on a jumbo-sized rate hike from the RBNZ this month.

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. Now they’re struggling to fill positions and meet the demand for goods and services.

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New Zealand business confidence improves, still weak: ANZ survey

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The 4.3 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, citing the Labour Cost Index. The measure rose 1.1 per cent from the previous quarter, less than the 1.2 per cent gain economists expected.

Average ordinary time hourly earnings for non-government workers gained 0.9 per cent from the previous quarter, while the annual increase slowed to 8.1 per cent from a record 8.6 per cent.

Details

• The participation rate was unchanged at a record 71.7 per cent
• Quarterly employment increased less than the 0.3 per cent expected by economists
• Annual employment growth was 1.3 per cent, up from 1.2 per cent in the third quarter but less than the expected 1.5 per cent
• Statistics New Zealand said the underutilisation rate, which is a broader gauge that includes employed people seeking additional hours, rose to 9.4 per cent from 9 per cent in the third quarter, primarily reflecting increases in the potential labour force BLOOMBERG