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Jobless rate rises to two-year high

Thursday 7th August 2008

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New Zealand's jobless rate rose to a two-year high 3.9% in the second quarter, more than expected, as slowing economic growth reduced companies' demand for workers.

The unemployment rate rose from a revised 3.7% in the previous three months, according to Statistics New Zealand. Economists had forecast unemployment of 3.8%

The report was mixed, with employment rising 1.2%, reversing a slump in the first quarter. The two quarters together still paint a picture of stalled employment, economist Shamubeel Eaqub said, keeping intact the prospect of further interest rate cuts by the Reserve Bank.

"With little in the data to change the economic picture and ongoing concerns over financial stability the RBNZ should remain firmly on an easing track," said Eaqub, director of Australia & New Zealand investment research
at Goldman Sachs JBWere (NZ).

The participation rate rose to 68.6% from 67.7%.

A weakening jobs market may help reduce pressure on wages growth, which held at a record annual pace in the 12 months ended June 30. Workers have been demanding more pay as they face rising household costs for food and fuel.

Reserve Bank Governor Alan Bollard has predicted inflation will peak at 5% in the September quarter, giving him confidence to cut interest rates last month. New Zealand may have fallen into its first recession since 1998 in the first half of the year as GDP shrank in the first three months.

By Jonathan Underhill

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