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NZ jobless rate falls below 5% for first time since 2008, wage inflation muted

Wednesday 2nd November 2016

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New Zealand's unemployment rate fell below 5 percent for the first time since December 2008 as employers took on more staff than expected, although that didn't spur wages to rise at a faster pace. The kiwi dollar rose on the figures.

The unemployment rate fell to 4.9 percent in the three months ended Sept. 30 from a revised 5 percent rate in June, Statistics New Zealand said. Employment grew 1.4 percent in the quarter, outpacing a 0.5 percent gain economists were picking, with rental, hiring and real estate services adding 5,000 jobs in the period. That was also faster than a 0.7 percent increase in the size of the working-age population, which helped drive up the participation rate to a record 70.1 percent, though a new methodology influenced that series. 

"This strong growth in employment, coupled with fewer unemployed people, pushed the unemployment rate below 5 percent for the first time in nearly eight years," labour and income statistics manager Mark Gordon said in a statement.

The New Zealand dollar rose to 72.05 US cents from 71.81 cents immediately before the report was released. The trade-weighted index climbed to 77.49 from 77.16.

New Zealand's swelling population, fuelled by record migration, has kept wage increases limited in recent years, stifling domestically generated inflation at a time when a strong kiwi dollar makes imported products cheaper. That low level of consumer price inflation has contrasted with rapid gains in asset prices such as housing and made life difficult for the Reserve Bank which has refrained from slashing interest rates for fear of stoking an ebullient property market. 

Today's data show wage inflation remained muted, with the ordinary time private sector labour cost index increasing 0.4 percent in the quarter, unchanged from the previous quarter, and in line with economists' expectations. Rental, hiring and real estate services, which added 5,000 jobs largely in Auckland, registered no increase in salary and ordinary time wage rates in the quarter, the only industry group that didn't eke out a gain in the period. 

Public sector wages rose 0.7 percent in the quarter, due largely to new collective agreements for nurses, primary teachers and police. 

About 19.5 percent of the country's workforce was on collective agreements in the September quarter, with 18.7 percent members of a union. Southland reported the highest rate of union membership at 23.6 percent, while Auckland had the lowest at 16 percent. 

Auckland accounted for more than half of the new jobs added in the quarter, though its unemployment rate ticked up to 5.3 percent from 4.7 percent as more people entered the labour force. The Tasman, Nelson, Marlborough, West Coast region had the lowest unemployment rate at 2.8 percent, while Northland's was still the highest at 7.6 percent. 

The figures showed total hours worked rose 1.2 percent in the quarter for an annual increase of 6.7 percent. 

The recently added underutilisation rate, which seeks to measure the potential labour supply, was at 12.2 percent, down from 12.7 percent in June. The part-time employment rate was at 21.8 percent, up from 21.5 percent in the previous quarter.

The quarterly employment survey, also released today, showed ordinary time private sector hours rose 0.3 percent in the quarter to $27.81 for a 1.6 percent annual gain. Public sector wages rose 3 percent to $37.45, and were up 1.4 percent from the previous quarter.

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