By Alex Tarrant
New Zealand’s unemployment rate rose to 5.2% in the December 2016 quarter as a growing number of people joined the search for work, Statistics New Zealand figures show. The number of people employed in the country also grew during the three months.
The unemployment rate rose from 4.9% in the September 2016 quarter. The 5.2% reading came in above the economist consensus forecast of 4.8%. A year ago the unemployment rate was a revised 4.9% (from 5.0%).
The Reserve Bank forecast in its November 2016 quarterly Monetary Policy Statement (MPS) that the unemployment rate should fall to 4.7% in the March 2017 quarter before settling at 4.5% through the 2018 and 2019 March quarters.
Since the RBNZ’s November forecast, Stats NZ figures showed record high net migration into the country during the December quarter, pushing up the volume of people looking for work. The Reserve Bank’s next public forecast update is due on 9 February.
The central bank in November said the increasing labour force had largely been absorbed into employment during 2016 as the headline unemployment rate tracked down. The rise in the unemployment rate in the December quarter suggests this trend may have tempered off in the last three months of the year.
The rise in the headline unemployment rate came as New Zealand’s labour force – those in work and those actively seeking work – expanded during the December quarter. The labour force participation rate – employed and unemployed as a proportion of the working age population – rose 0.4% to 70.5%.
The number of people not employed but actively seeking work is the figure used to determine the unemployment rate. A rise in the number of those seeking work can negatively affect the unemployment rate even if more people enter jobs during a quarter.
This means economists also look at the Stats NZ employment figures alongside the headline unemployment rate as a gauge of how the economy is doing. The number of people employed rose 0.8% during the December quarter against a consensus forecast of 0.7%. Annually, employment was up 5.8%.
Employment during the quarter was driven by the retail trade, accommodation and food services industry, Stats NZ said. Construction and the professional services industries were close behind.
The Auckland region accounted for 52% of New Zealand’s employment growth during the quarter. Taranaki experienced the only significant change in regional unemployment rates, up 2.9 percentage points to 6.8%.
The Reserve Bank in its November MPS noted capacity pressure in the construction industry was particularly tight, with construction firms reporting difficulties finding both skilled and unskilled labour.
Wage growth steady
Meanwhile, growth in New Zealand wages remained steady during the quarter, further Stats NZ figures show. Annual wage inflation, including overtime, was 1.6% in the quarter according to the labour cost index. It has hovered between 1.5% and 1.6% in the last seven quarters.
Hourly earnings increased 1.3% over the year, Stats NZ’s quarterly employment index showed. This was the lowest annual increase since the year to the September 2010 quarter. High net immigration had been limiting wage pressure during the year, the Reserve Bank noted in November.
The labour market and migration figures will be closely watched by the central bank as it determines its next interest rate move on 9 February. The RBNZ cut the Official Cash Rate in November by 25 basis points to 1.75%. In a statement at the time, Governor Graeme Wheeler said monetary policy would continue to be accommodative.
ASB economists on Tuesday said they expect the RBNZ to start raising the OCR again in late 2018, earlier than previously thought, as inflation pressures return to the economy.
The numbers (and quarterly changes from September):
Working-age population: 3,755,000 (up 0.5%)
Employed: 2,510,000 (up 0.8%)
Unemployed: 139,000 (up 7.6%)
Filled jobs: 1,909,000 (up 1.2%)
All figures are seasonally adjusted.