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NZ jobless rate rises to five-year high

Thursday 6th November 2008

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New Zealand's unemployment rate rose to a five-year high in the third quarter as the weakening economy trimmed demand for workers.

The jobless rate rose to 4.2%, seasonally adjusted, from 3.9% in the second quarter, according to Statistics New Zealand. That's less than the 4.3% consensus estimate in a Reuters survey and is the highest since December 2003, when it reached 4.6%.

The weakening jobs market tallies with National Bank's Business Outlook survey, which showed a record slump in business confidence last month as a net 21% of companies expected to have fewer workers. Reserve Bank Governor Alan Bollard is forecast to lower the official cash rate at least 50 basis points in December, extending the steepest easing cycle since the OCR was introduced in 1999.

Rising unemployment "is the beginning of an uptrend we believe will persist at least through to the end of 2009," said Shamubeel Eaqub, economist at Goldman Sachs JBWere. "The pattern of past recessions suggests it's really the next six to nine months that will see labour market weakness and this is consistent with surveyed hiring intentions and labour shortage measures."

The New Zealand economy fell into recession in the first half of the year and may extend its contraction through until Christmas, some economists say. A drop in housing demand, weaker consumer spending and deteriorating business confidence may linger through 2009.

The nation will also have to weather the effects of a global slowdown, crimping demand for the nation's exports. Fitch Ratings yesterday predicted the world's largest economies - the US, UK, Euro area and Japan - will contract 0.8% in aggregate in 2009, from growth estimated at 1.1% this year. That would mark the steepest slump since WWII, Fitch said.

New Zealand's export returns are being underpinned by the weakening kiwi dollar. ANZ National Bank's commodity export price index fell 7.4% in October from the previous month to an 18 month low. Still, in New Zealand dollar terms, commodity prices rose 0.7% and are hovering near its record high.

Employment rose 0.1%, or 3,000 jobs in the third quarter, according to the statistics department. The participation rate rose to a record 68.7% from 68.6% in the second quarter. Full-time employment rose by 8,000 jobs, or 0.5%, while part-time jobs fell by 2,000 jobs, or 0.5%.

By Jonathan Underhill

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