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UPDATE: New Zealand's unemployment rate falls to 11-year low

Tuesday 6th August 2019

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New Zealand’s unemployment rate fell to an 11-year low while wages ticked up on the back of a rise in the minimum wage.

The seasonally adjusted unemployment rate fell to 3.9 percent in the three months ended June 30, from 4.2 percent in the March quarter, Stats NZ said in its household labour force survey. Economists surveyed by Bloomberg had tipped the unemployment rate to lift to 4.3 percent.

The New Zealand dollar rose to 65.68 US cents from 65.26 cents just ahead of the data.

The unemployment rate was the lowest since June 2008 when it was 3.8 percent. Among OECD countries, New Zealand’s unemployment rate is higher than the United States where it is 3.6 percent and the United Kingdom where it is 3.7 but ahead of Australia’s 5.2 percent and Canada’s 5.5 percent, Stats NZ said.

“Since late 2012, the seasonally adjusted unemployment rate has largely been tracking down, towards levels seen before the global financial crisis in 2008,” labour market and household statistics senior manager Sean Broughton said.

The unemployment rate for men fell to 3.6 percent in the June quarter from 3.9 percent in the prior quarter. For women, it was 4.2 percent versus 4.4 percent.

The employment rate was 67.7 in the June quarter versus 67.5 in the March quarter.

The number of employed people rose 0.8 percent in the quarter to 2.68 million and was 1.7 percent higher than a year earlier.

According to Stats NZ, private sector wage inflation - including overtime - rose 0.8 percent in the quarter for a 2.2 percent annual increase. 

Public sector wage inflation was up 0.4 percent in the quarter for a 2.2 percent annual gain.

Across both sectors, wage inflation rose a quarterly 0.7 percent and an annual 2.1 percent.

Stats NZ noted, however, that wage inflation was driven up by several collective agreements, which came into force during the year, as well as the government’s April 1 increase in the minimum wage to $17.70 an hour from $16.50. 

If wages impacted by the minimum wage had remained constant, inflation across both the private and public sector would have increased only by 0.5 percent on quarter.

As a result, while wage inflation is tracking higher than the 1.7 percent increase in annual inflation in the June quarter, it is unlikely to shift expectations that the central bank will cut interest rates by 25 basis points to a record low 1.25 percent at tomorrow’s rate review.

New Zealand’s central bank now has the additional goal of "supporting maximum levels of sustainable employment within the economy" added to its goal of price stability. Tepid inflation,  a slowing economy and global economic headwinds are expected to spur tomorrow’s cut.  

Today's figures show the participation rate in the workforce held steady at 70.4 percent in the June quarter and was down 0.6 percentage points from the year before.

The under-utilisation rate, which measures the country's potential labour supply and unmet need for work, fell 0.3 percentage points on the quarter to 11 percent. It was down 1 percent on the year. The rate was the lowest since September 2008, Stats NZ said.

Total actual weekly hours worked fell 0.9 percent in the quarter to 91.0 million and were up 1.3 percent on the year.

The quarterly employment survey, also released today, showed private-sector ordinary time average hourly earnings rose 1.1 percent to $30.34 in the June quarter and were 4.7 percent higher than a year earlier. Public-sector ordinary time wages rose 0.1 percent to $40.39 in the June quarter and lifted 3.5 percent on the year.

The working-age population numbered a seasonally adjusted 3.96 million in the June quarter, up 0.5 percent since the March quarter and 1.9 percent higher than a year earlier.

(BusinessDesk)

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