By Alex Tarrant
New Zealand’s unemployment rate rose unexpectedly in the December quarter to 6.8% from 6.4% in the September quarter, as part-time employment fell, figures released by Statistics New Zealand show.
The rise does not bode well for December quarter GDP figures, which had been expected to show the New Zealand economy did not contract for two consecutive quarters, after a fall of 0.2% in the September quarter. The figures also raise the chance the Reserve Bank of New Zealand will keep the Official Cash Rate on hold at 3% until at least September this year.
The New Zealand dollar fell by about half a cent immediately after the news, from 77.75 US cents to 77.25 US cents. It fell likewise against the Australian dollar.
The median economist expectation according to a Reuters poll had been for the unemployment rate to remain at 6.4%. Of the major New Zealand banks, ASB had forecast 6.8%, ANZ 6.6%, BNZ 6.4% and Westpac 6.2%. The unemployment rate is seasonally adjusted.
“Results over the past twelve months indicate that the labour market has struggled to gain momentum following the recent economic downturn,” Stats NZ labour market statistics manager Peter Gardiner said in a media release.
“However, while the December quarter results indicate a further deterioration in the labour market, key indicators are showing an improvement since this time last year, with lower unemployment and positive annual employment growth,” Gardiner said.
Unemployment was down from a revised 7% (revised from 7.1%) in the December 2009 quarter.
During the December 2010 quarter part-time employment decreased 2.8% from September while full-time employment increased 0.3%, Stats NZ said. Actual hours worked per week increased 0.2%.
Employment falls 0.5%
The number of employed people in the labour force fell by 0.5%, or 11,000 to 2,182,000 during the December quarter. This compared to an expected rise of 0.2% in the number of employed people according to the Reuters poll.
The number of unemployed rose 5.1%, or 8,000 to 158,000, Stats NZ said.
The number of people in the labour force – those in or actively seeking employment – fell 0.1% to 2,341,000. A rise in the working age population of 0.4% to 3,442,800 meant the labour force participation rate fell 0.4 points to 67.9%.
The number of working age people not in the labour force rose 1.6%, or 17,000 to 1,107,000.
The unemployment rate had been volatile throughout 2010, falling from 7% in December 2009 to 6% in March, before rising to 6.9% in June and falling to 6.4% in September.
Statistical analyst Will Bell said Stats NZ had been looking at the data due to the volatility, but had not found any errors.
Statistics New Zealand’s trend series for the unemployment figures show it rising steadily from 6.3% in June to 6.7% in December.
New Zealand now had the twelfth lowest unemployment rate in the OECD, from eleventh in the September quarter, Statistics New Zealand said.
Here is the reaction from ASB economist Jane Turner:
The Q4 labour market data proved weaker than expected (although was in line with the weakness signaled by the QES survey). With today’s result adding to the run of underwhelming data, it is clear the economic recovery has been very patchy and struggled to keep traction over the second half of 2010. Nonetheless, there are clear signs that underlying labour demand is lifting, and is likely to flow through to increased employment over 2011 as business confidence recovers. But for the time being, low and stimulatory interest rates are required to help the economic recovery gather momentum, and we do not expect the RBNZ to lift interest rates until September 2011.
Market reaction:
The NZD has dropped just over 0.5c against the USD and AUD and short-term swap rates have fallen 5-7 basis points in the wake of the release of the data.
Here is the government's reaction from Social Development Minister Paula Bennett
The number of people officially unemployed has risen in the last quarter, says Social Development and Employment Minister Paula Bennett.
The Statistics New Zealand rate, which includes those aged 15 years and over seeking one or more hours work a week, has increased from 6.4% to 6.8%.
“We are still very much in a slow recovery, making the Government’s push towards investment to create sustainable jobs vital,” says Ms Bennett.
There was a 0.3 percent increase in full time employment. Part time employment has fallen by 2.8%.
Statistics New Zealand figures show 27,000 jobs were created in 2010.
"Ideally the rate would be dropping, but it's not uncommon to see a rise the rate at this time of year and last Decemeber quarter it was 7.4%," says Ms Bennett.
“The road to recovery is a bumpy one, employers have boosted working hours before hiring new staff, but they’re indicating they’ll take on more staff this year,” says Ms Bennett.
“It’s clear the 90-day trial is vital to give employers that extra bit of confidence to be able to employ new people on in this environment,” says Ms Bennett.
The number of young people in work has risen by more than 5,400 over the last year and the number of young people who are NEET (Not in Education Employment or Training) has fallen from 10.5% to 9.8%.
The Youth Unemployment rate fell from 18.4% to 16.8% over 2010.
“What we’re also seeing is more young people staying in education or returning to do more study, which makes sense,” says Ms Bennett.
The Maori unemployment rate fell from 16.2% to 15.5% in the December quarter.
Pacific Youth unemployment rates fell from 29.8% to 27.2% over the same period.
New Zealand’s 6.8% unemployment rate compares to UK (7.8%), Australia (5.0%) and Ireland (13.9%).
(Updates with Labour reaction in video, govt reaction, NZ$ reaction, chart)
The chart below uses unadjusted figures from Stats NZ
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