Unemployment has unexpectedly risen - albeit only by a fraction to 3.3% from 3.2%, according to Statistics New Zealand.
Wages have risen by more than expected, with private sector hourly earnings up by some 7%, which is close to matching the current 7.3% annual inflation rate.
Statistics New Zealand said that the unemployment rate as at the end of the June quarter was 3.3%.
Economists had expected a continued fall in the rate, with predictions it may get down to 3% or even lower.
While the rise in unemployment might actually provide the Reserve Bank (RBNZ) with some sense of relief, the increase in wages will not. It had been forecasting an increase in private sector hourly wages of just 5.6%.
Westpac acting chief economist Michael Gordon said for the RBNZ, the "strong wage inflation outcomes" will likely be the most significant part of Wednesday's reports.
"The risk for the RBNZ is that wage pressures provide an avenue for the recent bout of price shocks to turn into sustained inflation over time. We’ll review our OCR forecasts later today, but the risks are clearly towards a higher peak than the 3.50% that we have been forecasting for some time," Gordon said.
ANZ economist Finn Robinson and chief economist Sharon Zollner said the wage figures were "the real news" in the labour market data.
"Wage growth is rising even faster than anticipated, raising the risk of a wage-price spiral as high inflation gets embedded in wage-setting behaviour," they said.
"Unfortunately for the RBNZ, this further acceleration in wage growth only makes the inflation fight harder. Yes, the headline unemployment number came in a fair clip above our expectations [they expected 2.8%] – but that just shows that firms were not able to find as many suitable workers as we estimated they would have, not that they weren’t looking. The extreme tightness in the labour market has just shown up in another form.
"Probably the most sobering aspect of this jobs report is the fact that we’ve seen something of a plateau in the unemployment rate in recent quarters, while wage growth has continued to accelerate. That suggests the RBNZ may need to hit the labour market quite hard to bring inflation pressures back down – and that likely means higher unemployment than we previously expected to see."
Stats NZ has a number of measures for wage rises. It said wage inflation, measured by the labour cost index (LCI), was 3.4% in the year ended June 2022, while average ordinary time hourly earnings rose 6.4%.
As stated above, private sector hourly earnings rose 7.0%.
"The June quarter had the largest increase in LCI salary and wages rates since late-2008," Stats NZ's business employments insights manager Sue Chapman said.
"Over the year, a steadily increasing number of wages have been raised to better match market rates, as well as attracting or retaining staff.
"Nearly two-thirds of roles surveyed in the LCI saw an increase in ordinary-time wage rates in the year ended June 2022 – the highest level since this series began in 1993."
In terms of the detail in the unemployment figures, the seasonally adjusted underutilisation rate was relatively unchanged at 9.2% this quarter, compared with 9.3% last quarter.
The seasonally adjusted labour force participation rate was 70.8%, compared with 70.9% last quarter.
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