New Zealand’s unemployment rate rose 0.2 percentage points to 4.6% in the June quarter as employment failed to keep up with a growing work force, according to data released by Statistics NZ.
The working age population grew by 18,000 people during the quarter and an additional 2000 people chose to enter the workforce. This increased the total labour force by 20,000 people.
However, the number of people who were employed only increased by 12,000 and the remaining 8000 were classified as unemployed. The total number of jobless people was 143,000, or 4.6%.
Deb Brunning, the labour market manager at Stats NZ, said this was still the highest unemployment rate reported in the past three years.
“Recent rises in unemployment align with other economic indicators, including an increasing number of benefit recipients, a decreasing number of job vacancies, and declining GDP per capita,” she said.
Broader measures of the labour market also weakened. The underutilisation rate, which measures anyone who wants more work than they have, rose 0.6% to 11.8% which was also a three year high.
These numbers roughly matched the Reserve Bank forecasts published in May, but were slightly stronger than market consensus. Most economists expected unemployment to hit 4.7% and participation to decline.
Instead, labour force participation rose during the quarter while employment remained flat. This accented the increase in unemployment which is calculated as a fraction of the labour force.
This means the number of jobs in the economy did increase during June, just not enough to match the higher number of people looking for work. While headline unemployment matched most forecasts, the underlying job market was stronger than many economists expected.
Brunning said young people accounted for almost half the increase in unemployment and underutilisation that has occurred over the past year. Youth unemployment rates were over 20% for those aged 15 to 19, and at 8% for those between 20 and 24.
Pay bump
Wage growth, as measured by the labour cost index, rose 1.2% during the quarter which brought the annual change to 4.3%. This was driven by record growth in front-line public sector wages.
“The effects of pay increases for some health workers, along with school therapists and early-childhood education staff, have all come through in public sector wage growth this quarter, in addition to other settlements seen over the year,” Brunning said.
Economists and the Reserve Bank pay more attention to private sector wages, which grew just 0.9% during the quarter and were up 3.6% annually. This matched the Reserve Bank’s forecasts but was stronger than the market consensus.
In a note published prior to the data release, economists at BNZ said stronger than expected labour data could prompt some traders to back away from predicting imminent interest rate cuts.
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