Unemployment hits six-year high, dollar jumps

Thursday 7th May 2009

Unemployment hit a six-year high as the global economic downturn begins to seep into New Zealand’s employment market, but the currency jumped as the number of jobless fell below market expectations.

The unemployment rate rose to 5% in the latest Household Labour Force Survey released by Statistics New Zealand, the highest level since March 2003 when it reached 5.2%, as the worldwide recession forces companies to cut labour costs. The dollar jumped to 58.89 US cents, and reached as high as 58.96 cents, from 58.32 cents immediately before the release after economists predicted unemployment would reach 5.3%.

Participation in the labour force fell 0.7% in the first quarter to 68.4% or 2.2 million people, down from a peak of 69.7% in the previous quarter. Unemployment is predicted to peak at 6.8% next year in the Reserve Bank of New Zealand’s March policy statement.

“We continue to believe job losses will be the major issue for the economy through 2009,” said Bernard Doyle, strategist at Goldman Sachs JBWere. “Declining labour market participation may be the first evidence coming through of discouraged workers withdrawing from the labour force.”

Rising unemployment is set to become a major issue for economies around the world this year, as Japan, the US and Europe move into a synchronised recession. The US jobless rate has reached 8.5%, and continuing claims for the unemployment benefit are expected to rise to 6.4 million people, according to a Reuters survey.

The unemployment rate across the Tasman will be announced later today, and economists predict it will rise to 5.9% from 5.7%.

The Australian economy has shown some resilience to the global slump after its trade surplus widened for the third month in a row, while retail sales rose 2.2%, more than four times the gain expected by economists.

Businesswire.co.nz

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