By Bernard Hickey
New Zealand's unemployment rate rose to 6.4% in the June quarter from 6.2% in the March quarter as a slight rise in the participation rate more than offset a 0.4% rise in employment in the quarter.
The result was broadly in line with market expectations and consistent with signs of an economic rebound driven by construction and real estate as Auckland's housing market booms and Christchurch's rebuild grinds into action. However, wage inflation remained subdued, keeping the pressure off the Reserve Bank to hike the Official Cash Rate any time this year, economists said.
Westpac Chief Economist Dominick Stephens said there was nothing in the Statistics NZ figures for wages and employment to suggest wage inflation was picking up.
"At the margin the data were slightly weaker than we or the Reserve Bank expected, but the surprise was not significant enough to cause a market reaction or to change our monetary policy expectations," Stephens said.
JP Morgan Economist Ben Jarman said the labour market took a breather in the June quarter.
"The fact that the jobless rate has paused above 6%, along with the absence of wage and price pressures, tells the RBNZ they have a little time on their hands," Jarman said.
The consensus economic forecast was for a rise in the jobless rate to 6.3% and 0.3% employment growth. The labour force participation rate rose 0.1% to 68.0%. The NZ$ was broadly unchanged after the figures were released.
Statistics NZ also released the Quarterly Employment Survey showing a deceleration in annualised wage inflation to 1.7% in the June quarter from 2.1% in the September quarter a year ago.
"Wage growth remains very subdued, and is unlikely to concern the RBNZ for some time," said ASB economist Daniel Smith.
"We do expect a gradual pickup in labour costs over the coming year as the labour market tightens but with plenty of slack seemingly remaining, any pressures will only be modest," he said, adding ASB continued to expect the Reserve Bank to wait until March next year before lifting the OCR.
In the quarter the seasonally adjusted number of people employed increased by 8,000 or 0.4% to 2.242 million, which followed a 1.7 percent rise in the March 2013 quarter.
Statistics NZ said the rise in employment came entirely from a 10,000 rise male employmen, while the number of women employed fell 0.2%.
It said the 2.2% annual growth in actual hours worked was larger than employment growth, which reflected a 1.5% rise in average weekly hours worked to 33.6 hours.
Weak wage inflation
Statistics NZ also reported private sector labour cost index inflation of 0.4% for the quarter and just 1.7% from the same quarter a year ago, which was down from 1.8% in the March quarter. This is expected to keep the pressure off wider inflation.
ASB economist Daniel Smith said construction wage cost inflation in Canterbury was 0.6% for the quarter, about double the level for the rest of New Zealand, but had slowed somewhat.
"The annual rate of growth has slowed to 3.6% from 4.3%, while annual construction cost growth for the rest of the country remains fairly steady at 2.1%. This suggests limited spill over to the rest of the country from the increased cost in Canterbury generated by rebuild demand. This will be a key area the RBNZ will be monitoring over the coming year," Smith said.
Some economists said the slow growth in employment and weak wages growth despite apparently strong economic growth was due to a lag.
"While the strength in the timely domestic activity indicators is yet to fully translate into significant labour market improvement, we expect this to come through over the second half of the year," said HSBC Chief Economist Paul Bloxham.
"We still expect the RBNZ’s next move is up and that this could occur around year end, though the risks are tilted to a slightly later move," he said.
Political reaction
Employment Minister Steven Joyce said the figures showed a continuation of a trend of growing employment as the economy recovers, pointing to Statistics NZ's Quarterly Employment Survey showing an extra 65,400 jobs added over the last two years.
“Through our Business Growth Agenda, the National-led Government is encouraging more investment in New Zealand as we know that nothing creates jobs and boosts incomes for Kiwi families better than business growth and investment,” Joyce said.
Labour Spokesman Grant Robertson said the 5,000 increase in unemployment showed the National Government had no plan to create jobs.
“After nearly five years in office, National’s legacy is growing unemployment with more than 150,000 New Zealanders still desperately looking for work,” he said. “It’s time for National to get past the excuses of the Global Financial Crisis and the earthquakes.”
(Updated with more details and charts, reaction)
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22 Comments
Hmmmm - the average house price just got a little more expensive for Joe Doe Kiwi.
Wage inflation as measured by the labour cost index (LCI) eased to 1.7 percent in the year to the June 2013 quarter, down from 2.0 percent this time last year. Wage rates for just over half of the positions surveyed in the LCI increased during the year. Of those that rose, the average increase is the lowest since the December 2000 quarter, at 3.4 percent. Annual consumer inflation is currently at its lowest since 1999.
Growth in wages, as measured by the QES, has continued to ease. Average ordinary time hourly earnings rose by 2.1 percent over the year, the lowest wage growth since the December 2010 quarter. Read more
Stats pretty much as expected.
Job growth in Auckland looks pretty meagre.
Let's see end of the year to what extent job growth has been able to balance out the turnaround in migration to Aus and it's jobs.
Would be interesting to see what the "underemployed" stats are - they are nearly as important as the "unemployed" stats
Just analyzed our internal credit approvals Bernard and they have dropped massively recently.. What's more the defaults for utilities are sky high. Google searchs reinforce this. Thousands of inquiries in the last month with reoccurring theme "credit for bad debt" etc. my interpretation is that there are lots and lots of folk hurting out there, and that the ue rate may go higher still.
Despite all the doom gloom and despondency brigade's predictions of doom gloom and despondency in the economy, this report shows that wages grew in the economy, albeit by only a small amount.
That's right... wages increased.
And did any one notice the article in today's NZ Herald?
The headline was "Mid winter heats up Auckland rents."
I guess the deliberate withdrawal of state housing stock in conjunction with a commitment to extend the accommodation supplement to the private sector will do the trick.
Come on now Matt in Auck (now Adelaide).
No need to call me names. I am in fact one of the people doing my best to provide houses for people. There's no one crammed into my houses.
You should be patting me on the back... encouraging me in my efforts to aleviate this situation.
If there were more people like me we wouldn't have people crowding into properties would we. 'Cause there would be more properties to lease.
Instead you call me a greedy scumbag.
It is a fine thing you do , Mr Landlord , to provide shelter for the good folks of NZ .......
..... indeed , our problem really is that too many people are hung up on the ideal of owning their own home .... pushing those prices ever higher ...
Germany has much lower home ownership rates than us , more citizens prefer to rent , and to invest heavily in businesses and in equity instead ....
..... NZ's economy would be so much better off if there were more rentals and landlords , not less ...
Seriously got it wrong Matt-in-Adelaide !
Renting provides great flexibility - people can leave a town in decline for a town that is booming. Otherwise you can easily get caught in negative equity when your town dies.
On the other hand, renters are often treated as secondhand citizens. Sometimes this is deserved and sometimes not. Equally, some rentals are overpriced squalid damp shacks and some are quite nice actually. Perhaps the way forward is to improve all aspects of renting - for the landlord and for the tenant and make it more desirable for the decent tenants, and more profitable for the good landlords, ie deal with the details.
Very good points there Mr Bear and Zanyzane.
It's always interested me that Germany has such a high rate of leased housing, relative to New Zealand, and at the same time the country has a relatively high number of family-owned businesses... the famed 'Mittelstand'.
They are the type of businesses credited with making the German economy so powerful.
Carry on the good work you two do in educating (and entertaining?) the masses at interest.co.nz.
If we want to be like Germany property wise we would need to change to rentals to being more like long term leases. And we would need some form of rental WOF.
If tenants had the security, stability and good quality housing that home ownership offered then maybe Your Landlord really would be providing a worthy service to society.
The increase in unemploymet rate is not new anymore. The number of new jobless claims is a gauge of layoffs in the nation. As they decline, it is expected that hiring will pick up. The four-week moving average, a more accurate measure that smooths out weekly volatility, fell from 352,750 to 350,000. The measure has not dropped that low since early 2008. Also, the Bureau of Labor Statistics introduced its state jobs report . The report shows irregular, snail-like financial progress across the nation.
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