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NZ 4Q jobless rate falls to 4.5% with little wage inflation; kiwi gains

Wednesday 7th February 2018

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New Zealand's jobless rate fell to a fresh nine-year low in the December quarter but an influx of workers has kept a lid on wage inflation, something that will likely add to the view the central bank will continue to signal a flat interest rate track at Thursday’s review.

The unemployment rate dropped to 4.5 percent in the three months ended Dec. 31 down from 4.6 percent in September, Statistics New Zealand said in its household labour force survey. That's the lowest level since the December 2008 quarter and below the 4.7 percent forecast in a Bloomberg poll of 12 economists.

Employment rose 0.5 percent in the quarter to 2.61 million and was 3.7 percent higher than a year earlier. Economists had expected a 0.4 percent quarterly gain.

Regarding wage inflation, Stats NZ's said private sector wage inflation rose 0.4 percent in the quarter for a 1.9 percent annual increase. Public sector wage inflation was up 0.5 percent in the quarter for a 1.5 percent annual gain, and across both sectors, wage inflation rose a quarterly 0.4 percent and an annual 1.8 percent. In September it lifted an annual 1.9 percent.

The New Zealand dollar rose to 73.47 US cents from 73.05 cents immediately before the release. The Reserve Bank releases its monetary policy statement on Thursday and is widely expected to keep interest rates on hold at a record low 1.75 percent. Today’s jobs data will add to the view it will continue to signal no change on the immediate horizon amid a lack of inflationary pressures.

The data continued to be impacted by the Care and Support Workers Settlement Act 2017, which came into effect on July 1. Stripping out the impact of that deal, LCI wages and salaries would have increased 1.6 percent rather than 1.8 percent.

While the headline unemployment number is lower, a record inflow of migrants over the past several years has given employers a large pool of labour to choose from, which has helped keep a lid on wage inflation. 

The participation rate eased to 71 from 71.1 percent in September as growth in the working-age population outpaced growth in the labour force.

Underemployment - those in part-time employment who would like to work more and are available to do so –  hit a fresh record, rising 6.3 percent on quarter to 122,000. As a result, the underutilisation rate, which measures the country's potential labour supply and unmet need for work, lifted 0.1 percentage points from the prior quarter to 12.1 and the key contributor was underemployment.

“The underutilisation rate was just over 12 percent, reflecting about 340,000 New Zealanders with the potential to work more,” said labour market and household statistics senior manager Jason Attewell.

Total actual hours worked fell 0.6 percent in the quarter to 87,200 a week.

The quarterly employment survey, also released today, showed private sector ordinary time average hourly earnings rose 0.8 percent to $28.60 in the December quarter and were 3.1 percent higher than a year earlier. Public sector ordinary time wages rose 0.4 percent to $38.85 in the final quarter of the year for an annual gain of 3.2 percent.  


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