NZ jobless rate falls to 6.4% as economic growth stirs; kiwi dollar surges

Thursday 4th November 2010

New Zealand’s unemployment rate fell more than expected in the third quarter as the economy flickers into life after the recovery stalled earlier this year. The kiwi dollar jumped after the report.

The unemployment rate fell to 6.4% in the three months ended Sept 30 from a revised 6.9% in the previous quarter, according to the Household Labour Force Survey released by Statistics New Zealand. That reverses most of the previous quarter’s increase in a series that has been marked by volatility. The kiwi dollar jumped as much as 1.1% immediately after the announcement, and recently traded at 78.63 US cents, the highest since April 2008.

The number of people employed rose 1% to 2.19 million while those not in the labour force shrank 0.5% to 1.09 million. The participation rate increased 0.2 percentage points to 68.3%. A recovery in the jobs market may stoke bets the Reserve Bank will resume raising interest rates earlier than expected. Private sector wage costs rose a faster-than-expected 0.6% in the quarter, according to separate figures this week.

“The stronger employment numbers might prompt some people in the market to rethink when the Reserve Bank is going to start hiking interest rates,” said Robin Clements, an economist for UBS New Zealand. Still, the survey “has lost some of its credibility of late because of volatility” and it may not be enough alone to shift the central bank’s thinking.

Short-term unemployment, which shows people out of work for 26 weeks or less, fell 1.7% to 95,100 while the number of long-term unemployed, people out of work for more than 26 weeks, rose 8.1% to 38,300.

The release comes a day after Ministry of Social Development data showed 338,000 people claimed a benefit in the period, a net increase of 5,000 people in the quarter.

Today’s figures showed the make-up of unemployment is shifting, with fewer men and more women in the dole queue. Male unemployment fell 1.2 percentage points to 5.7% in the quarter, while female unemployment rose 0.4 percentage points to 7.2%.

Wage data earlier this week showed annual income growth outpaced inflation in the year through September, though that was collated before the government’s personal tax cuts and hike to GST.

The labour market typically lags behind the wider economy as firms feel the impacts of growth and contraction before it plays out in employment negotiations. The latest National Bank Business Outlook showed more firms are expecting to take on staff in the coming 12 months after expectations reached a trough in September. The jobless rate unexpectedly shot up 0.8 percentage points to 6.8% in the June quarter, and hit 7.2% at the end of 2009, the highest since the mid-1990s, as New Zealand dragged itself out of recession.

Businesswire.co.nz

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