New Zealand’s rate of unemployment nudged higher—to 3.6% from 3.4%—in the June quarter, while total employment increased 4% in the past year and has hit an all-time high of 69.8%.
The labour force participation rate, which measures the percentage of people over 15 who were either employed or actively seeking employment, rose to a new record high at 72.4%.
There are now more than three million people in the labour force, with 2.9m currently employed. These numbers a year ago were at 2.9m and 2.8m, respectively.
Statistics NZ defines an unemployed person as someone who has no paid job, is working age, is available for work, and has looked for work in the past four weeks.
A broader statistic is the underutilisation rate, which adds in part-time workers who would like more hours and people who aren’t available to work but are looking to start a job next month.
This underutilisation rate rose to 9.8% in June, up from 9.1% in the March 2023 quarter. Stats NZ said the largest increase came from part-timers who wanted more work.
The employment rate for women increased to 65.4%, the highest since the series began, while the rate for men rose to 74.4% – which was the highest since 1987.
Stats NZ said a quarter of all the employment growth during these three months was in tourism-related industries.
Jobs in the tourism sector returned to pre-Covid levels in June, with an 11% increase bringing the total number to 275,300.
Take-home pay
Wages, as measured by the labour cost index, were up 4.3% in the 12-months ended June, which was unchanged from the previous quarter.
This was marginally cooler than the Reserve Bank of NZ expected. It had projected a quarterly increase of 1.2% and an annual reading of 4.4% in its Monetary Policy Statement in May.
Stats NZ business prices manager Bryan Downes said annual wage costs have continued to increase at historically high rates.
A better measure of workers’ take-home pay is the unadjusted labour cost index, which increased 5.9% and average hourly earnings which rose 6.9%.
These wage increases would have been entirely consumed by higher household living costs, which rose 7.2% in the year ended June. A large chunk of this increase was due to the higher interest rates the RBNZ is using to tamp down inflation.
Stats NZ's quarterly household living-costs price indexes are different from the consumer price index—which was 6% in June—but better reflects the pressure on household budgets.
Wages were also supported by an increase in the minimum wage, which rose 7.1% to $22.70 per hour in April.
Downes said the largest contribution to the LCI in June came from the came from the retail trade and accomdation industry, which was up 1.5% on a quarterly basis.
“The rise in minimum wage was a core driver for the increase in wage growth in this industry over the quarter,” he said.
However, the increase in minimum wage made up only a small proportion of pay increases across all industries. More respondants cited the cost of living, matching market rates, and attracting staff.
Recessionary workers
New Zealand’s economy has slipped into recession, with activity falling in the past two quarters, but the decline has yet to translate into less jobs.
The labour market tends to lag the economic cycle, and employers have been filling long-standing vacancies as capacity appears in the workforce.
In a note published on Friday, Westpac economist Darren Gibbs said the number of online job vacancies has fallen 25% from a year earlier.
“That suggests that pent up demand for labour is either being met or withdrawn,” he said.
Some of the fresh capacity has come from migrants moving to New Zealand and straight into an economy hungry for their skills and services.
Statistics NZ reported the working age population increased by 0.7% in the June quarter and 0.8% in the March quarter — although much of this came from New Zealand workers.
Gibbs said the pressure on household finances from high inflation and rising mortgage interest rates may also be pushing more people to seek work and boosting total employment.
Some signs of weakening
But there are some signs that higher interest rates have begun to weaken the labour market.
Firms are becoming wary of the economic outlook and are planning to hire less staff. ANZ’s business outlook for July showed employment intentions at -1.6, albeit up from -3.5 in March.
And, the number of people on Jobseeker benefits has drifted up to 99,3000 in the June quarter (from 96,900) — although that figure is only loosely correlated with the actual unemployment rate.
ASB economists expect the unemployment rate will continue to climb above 5% in 2024 and ultimately peak at 5.5% in late 2025.
“This should temper wage increases and significantly dampen pressures on core inflation,” they wrote in a note published on Friday.
A projected loosening in the labour market forms the linchpin of the RBNZ’s forecast that CPI inflation will move back into the target range next year.
Once the Reserve Bank can be sure spare capacity in the labour market was cooling inflation, it would be able to cut the Official Cash Rate back towards the neutral rate at around 3%.
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