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Jobs data unlikely to ruffle RBNZ's feathers

Wednesday 6th November 2019

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Wage growth hit a 10-year high in the September quarter, but it won’t offer much relief to the Reserve Bank as it was all down to pay settlements.

Public and private sector wage inflation - as measured by the labour cost index - rose a quarterly 0.8 percent and an annual 2.4 percent. It was the largest annual increase since the June 2009 quarter, Stats NZ said.

However, if a lift in the minimum wage and a series of pay settlements were stripped out, the annual lift would have been a more modest 1.8 percent. That number continues to point to tepid wage inflation. 

The boost was largely in the public sector where wages were up 1.3 percent in the quarter for a 3 percent annual gain. Stats NZ noted public sector wages would have increased 1.7 percent annually without the pay settlements and higher minimum wage.

Private sector wages rose 0.6 percent in the quarter for a 2.3 percent annual increase. 

The higher minimum wage had a greater effect on the private sector, and wage inflation would have been 1.9 percent annually without that hike and the pay settlements.

“The minimum wage increase last quarter was the largest in percentage terms since 2007 and will continue to boost overall salary and wages,” said business prices delivery manager Bryan Downes.

Economists had largely expected higher wage inflation and said it would be unlikely to offer much relief to the central bank, which tended to look through what it considered one-off effects. 

New Zealand’s central bank now has the additional goal of "supporting maximum levels of sustainable employment within the economy" on top of its goal of price stability. Next week's monetary policy decision has split economists on whether the Reserve Bank would cut the official cash rate by another 25 basis points.

A lift in the third-quarter unemployment rate probably won’t be enough of a trigger because the central bank had forecast unemployment to tick up. 

The seasonally adjusted unemployment rate rose to 4.2 percent in the three months ended Sep. 30, from 3.9 percent in the June quarter, Stats NZ said. Economists surveyed by Bloomberg had forecast 4.1 percent.

The RBNZ should, however, be cheered by the improving underutilisation rate – which measures potential labour supply and unmet need for work. The seasonally adjusted underutilisation rate fell to 10.4 percent from 11.0 percent in the June quarter.

“Despite the quarterly rise in unemployment, the underutilisation rate, which is a broader measure of spare capacity in the labour market, has fallen to the lowest level in over 11 years,” said prices senior manager Paul Pascoe.

The fall was due to fewer underemployed people - those who work part-time but want to work more hours.

Overall, the seasonally adjusted number of people who were underutilised fell by 18,000 to 295,000 and marked the first time since the March 2009 quarter that the number of underutilised people had been below 300,000.

The employment rate was 67.5 in the September quarter, unchanged from June, while the labour force participation rate inched up to 70.4 percent from 70.3 percent.

The number of employed people rose a seasonally adjusted 0.2 percent in the quarter to 2.64 million and was 0.9 percent higher than a year earlier.

The quarterly employment survey, also released today, showed private-sector ordinary-time average hourly earnings rose 0.6 percent to $30.52 in the September quarter and were 3.9 percent higher than a year earlier.

Public-sector ordinary-time wages rose 1.2 percent to $40.86 in the September quarter and also lifted 3.9 percent on the year.

Total actual weekly hours worked reached 92.2 million in the quarter versus 90.2 million in the June quarter.

The working-age population numbered a seasonally adjusted 3.92 million in the September quarter, up 11,000 from the June quarter.

(BusinessDesk)



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