Unemployment rises despite record numbers of kiwis in work

By NZPA

Thursday 10th May 2007

The number of New Zealanders in work rose to a record high in the March quarter, but the unemployment rate still increased slightly to 3.8%, official data showed today.

The rise in the unemployment rate from 3.7% reflected a greater increase in the unemployed than growth in the labour force, according to the Household Labour Force Survey.

The still-tight labour market, with unemployment near 20-year lows, is one of the concerns for the Reserve Bank, which is trying to keep a lid on inflationary pressures.

However, economists believe today's data was not strong enough to push the bank into a third consecutive interest rate rise.

A jump in part-time workers boosted employment by 25,000, or 1.2%, to reach 2.14 million, the highest level recorded since the survey started in 1986, Statistics New Zealand said.

At the same time, the number of people in the labour force increased strongly to 2.23m, the highest level ever recorded by the survey.

The small rise in unemployment was in line with market forecasts, but the jump in employment outstripped expectations of a 0.5% rise.

"We believe demand for labour will reverse in the second half of 2007; until then we expect more hawkish language from the RBNZ but sufficiently mixed data and NZ dollar elevation to see the OCR on hold at 7.75% for the balance of 2007," Goldman Sachs JBWere economist Shamubeel Eaqub said.

Regionally, employment rose significantly over the last year in Waikato, Auckland and Bay of Plenty, but fell significantly in Gisborne/Hawke's Bay.

There was also a large rise in the number of employed people over 60 years old.

The only sector to lose seasonally adjusted jobs was construction, which experienced a 0.2% decline, Eaqub said.
In contrast, the domestic sector excluding construction rose 0.1%, the public sector rose 0.3%, and the external sector rose 0.7%.

The labour force participation rate increased by 0.6 of a percentage point to 68.6%, the second-highest on record.

That was largely due to the numbers of women entering the labour market, although female unemployment also rose, by 2000 people, compared with a decline in male unemployment by 1000, Statistics NZ said.

"With the participation rate at near record levels, it is difficult for the unemployment rate to rise quickly, given that most people will just move out of the labour force if employment demand softens," ANZ economists said.

Paid hours worked fell 0.4% in the quarter, possibly due to changes in employment law and the introduction of Working for Families encouraging greater part-time work at the expense of full-time work, ANZ said.

Annual employment growth rose 1.7%, up from 1.4% in December.

With its unemployment rate, New Zealand has slipped to fifth place in the OECD from fourth, swapping positions with the Netherlands. Norway remains at the top of the OECD table with an unemployment rate of 2.7%.

Australia's unemployment rate has fallen to a 32-year low of 4.4%.

Data on Tuesday showed that wages and hours worked continued to increase, but growth had slowed.

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