Has New Zealand's unemployment rate peaked earlier than expected?
Contrary to virtually universal expectations the unemployment rate remained at 5.1% in the March quarter.
The Reserve Bank expected the rate to rise to 5.2% while major bank economists were forecasting 5.3%.
In addition, wage pressures were muted - which is potentially good news for the inflation rate, if not for individuals' pockets.
The seasonally adjusted labour force participation rate was 70.8% this quarter, compared with 70.9% last quarter. The participation rate represents those available for work, so, the figure means that some people have effectively stopped looking for work - which does reduce the unemployed number.
Employment rose 0.1% in the quarter.
ASB senior economist Mark Smith said the country looked to be "close to the cyclical peak in unemployment".
"...But [we] will need to see the tentative NZ economic recovery become more established so that firms have the rationale and confidence to increase hiring," he said.
"With inflation within the 1-3% target range, further monetary easing looks appropriate to support the labour market and NZ economy. We envisage a further 75bps [basis points] of OCR [Official Cash Rate] cuts over 2025. Given concerns over inflation resurfacing, we expect the RBNZ to proceed carefully."
The RBNZ began dropping the OCR from the cycle peak of 5.5% last August and the OCR is currently at 3.5%. The next review of it is due on May 28.
Statistics NZ's labour market spokesperson Abby Johnston said seasonally adjusted levels of unemployment remained at 156,000 between the December 2024 and March 2025 quarters. The unemployment figure was up by 22,000 annually, as measured by Stats NZ's Household Labour Force Survey.
The underutilisation rate in the March 2025 quarter was 12.3%, compared with 12.1% in the previous quarter. Underutilisation is a broad measure of untapped labour market capacity that includes unemployed and underemployed people, along with the potential labour force.
Stats NZ said while underutilisation did not change significantly over the quarter, it rose by 35,000 annually, to 390,000 in the March 2025 quarter. The increase came primarily from the annual rise in unemployment.
Stats NZ said in the year to the March 2025 quarter, all salary and wage rates (including overtime), as measured by the labour cost index (LCI), increased 2.9%. This compares with 3.3% in the year to the December 2024 quarter. Economists had forecast a higher figure.
And the separate measure of wage growth, private sector hourly wages, increased by 3.8%, which is likewise less than was expected. The RBNZ had expected a 4.6% figure.
8 Comments
That is surprising and not what this Keynesian was predicting. I've also not heard about major layoffs in the private sector which I was expecting by now. Maybe they'll come after the May Budget from Willis. Cuts in the public sector are usually a signal for cuts in the private sector. Or maybe I'm just wrong.
It annoys me how they measure unemployment. The claim is no change but the uterlisation rate continues to fall. This is the true measure of the health of the labour market IMO.
"And the separate measure of wage growth, private sector hourly wages, increased by 3.8%, which is likewise less than was expected. The RBNZ had expected a 4.6% figure."
A significant signal of more slack than the numbers show.
Good points Mike - participation, utilization and migration all play a part in the unemployment number and what it is telling us.
I also found this result surprising given the cuts made and still continuing to be made to public services which I would have thought would radiate out to the private sector causing a slow down to the economy and or a complete halt to some projects. The jobs to go at Kinleith and Canpac yet to be included in the stats?
"The participation rate represents those available for work, so, the figure means that some people have effectively stopped looking for work - which does reduce the unemployed number."
..... as do those heading overseas, predominantly to Australia, reduce unemployment numbers.
Doing a bit of reading ..... in almost every country, relative to the private sector there is an over-representation of women in the public sector. This would have an impact?
And how many staff has the Auckland construction industry let go in the last 6 months? A lot of that group has probably gone to Oz.
Gotta love unemployment stats.
Jobseeker claimants up
Hours worked down
Paid hours down
Population up
Unemployment steady at 5.1%...lol.
Exactly. The bar to qualify as someone in paid employment is set so low.
As is the bar to being a part of the labour force....but the 'flexibility' serves a purpose....narrative control.
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