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Private sector wage growth beats forecasts in September quarter

Tuesday 2nd November 2010

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New Zealand’s private sector wage growth beat expectations in the third quarter, with annual gains ahead of inflation in the same period.

Private sector salaries and ordinary time wages rose 0.6% in the three months to Sept 30, according to Labour Cost Index released by Statistics New Zealand today, which tracks nearly 6,000 positions and measures changes in pay rates for a fixed quantity and quality of labour. That outpaced a Reuters consensus forecast of 0.4%. Private sector wages rose an annual 1.6% compared to the previous year, beating market expectations of 1.4% and was more than the 1.5% inflation rate in the year to September.

“The pick-up in wage growth has come earlier than we were expecting and does provide further evidence that the labour market has turned,” said Philip Borkin, an economist with Goldman Sachs and Partners. “Nevertheless, wage growth can still be classed as modest, which is unsurprising at this stage of the business cycle.”

The release precedes the Household Labour Force Survey on Thursday, which is expected to show New Zealand’s unemployment rate fell 0.1 percentage point to 6.7%, according to a Reuters survey. The labour market has been tough this year as the jobless rate increased amid the worst recession in 18 years, though the latest National Bank Business Outlook showed more firms expect to take on staff in the coming year after expectations reached a trough in September.

The Quarterly Employment Survey measure of private sector wages, which is exposed to compositional movements, rose 1% in the third quarter and 0.7% in the year to Sept 30. Total gross earnings, the broadest measure of income growth, rose 0.8% in the three months, and increased 3.7% in the year to Sept 30. The data showed the main contributors to fulltime employment in the quarter were trade and the arts, recreation and other service industries. The data comes ahead of the household labour force survey on Thursday, which is considered the main tier data, including the unemployment rate.

Statistics NZ data showed the total number of paid hours grew 0.2% to 50.2 million in the quarter, while the private sector decreases it share of total paid hours to 77.8% from 78.5%, mainly due to the seasonal downturn in the manufacturing industry.

Seasonally adjusted average weekly paid hours increased 0.1% to 37.9 hours for the September quarter.

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