New Zealand’s unemployment rate rose from 3.9% to 4% in the last three months of 2023, according to data released by Statistics New Zealand on Wednesday morning.
It appears the labour market has held stronger than expected by economists, many of whom were expecting an unemployment rate closer to 4.3%.
Becky Collett, a senior manager at Stats NZ, said unemployment had returned to pre-pandemic levels after spending two years at historic lows.
Unemployment dropped to 3.2% in December 2021 and only climbed 0.2% percentage points in the following year. High net migration and interest rates begun to push it higher at the start of 2023.
“Low unemployment formed part of the unique economic period from 2021 to 2022, as restricted borders limited increases to labour supply and labour demand remained high,” she said.
The underutilisation rate, a broader measure of spare labour capacity, also rose from 10.4% to 10.7% during the December quarter. This rate was 9.3% in the same quarter of 2022.
People who had less work than they were available for were the biggest driver of the underutilisation rate, with an extra 8,000 workers reporting wanting to work more hours.
An increase in net migration boosted the working age population by 3% during the year, meaning the country added 124,000 potential workers bringing the total to 4.3 million.
The working age population includes most NZ residents over 15 years old who aren't 'institutionalised'.
Stats NZ said this was the largest annual growth in the Household Labour Force Survey, which goes back to 1986.
The total employment rate was 69%. It rose 2.4% throughout the year and 0.4% during the quarter, but remains below its peak of 69.8% in June 2023.
“The employment rate decreased over the past six months as the working-age population grew faster than employment, meaning the proportion of people who were employed declined,” Collett said.
There were roughly 70,000 available jobseekers in December within a potential labour force of 92,000. Another 22,000 were unavailable jobseekers.
Lifting wages
Despite the weakening labour market, wages have continued to grow. The labour cost index increased 4.3% during the year, this measures the cost of the same standard job to employers.
Average hourly earnings rose 6.9% to reach $40.84, and average weekly earnings increased 6.1% to $1,588. These measures potentially include promotions and improvements in the quality of work.
Public sector wages rose faster than in the private sector. Annual private sector wages were up 6.6% in 2023, while in the public sector they were up 7.4% -- the largest annual increase since 2006.
Sue Chapman, a business employment indicators manager at Stats NZ, said the labour cost index for the public sector rose 5.7% annually, the highest rate since the series began.
“Recent growth in public sector earnings follows a period of pay restraint between April 2020 and March 2023 as a response to the impact of COVID 19,” she said.
Non-response rate
Statistics NZ’s quarterly employment survey only received a 78.6% response rate, the lowest since the survey was redesigned in 2021, and down from 87.3% in June 2023.
The Government agency said it did additional quality checks on the data to assess whether it was still accurate. It found national values were accurate, but there were biases in some particular industries.
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