NZ unemployment rate falls to 4.9% in March; Jobs growth exceeds boost in working age population; economists don't see any immediate interest rate reaction from the RBNZ

NZ unemployment rate falls to 4.9% in March; Jobs growth exceeds boost in working age population; economists don't see any immediate interest rate reaction from the RBNZ

New Zealand’s unemployment rate fell to 4.9% in the March quarter, as the number of jobs created beat a rise in the pool of people in and searching for work and growth in the working age population.

The Kiwi dollar rose by about US0.3c to over US69.5c on the news.

However, the underlying employment figures did give some cause for concern, with a rise in the number of 15-19 year olds not in education, employment or training rising to its highest level in six years.

Regional unemployment was up in the Bay of Plenty, Taranaki and Canterbury compared to a year earlier.

Other Stats NZ labour market figures showed annual wage inflation held steady at 1.6% during the quarter. Private sector wages though, at 1.5% annual growth, had their lowest rise since the June 2010 quarter, with the headline figure boosted by a 1.7% rise in public sector wages.

The unemployment figure should please the Reserve Bank – its February Monetary Policy Statement (MPS) had forecast the rate at 4.9% at this point. The Bank has been criticised recently as CPI inflation came in above its expectations, although this had been boosted by a number of variables Governor Graeme Wheeler has noted he could ‘look through’.

Prime Minister Bill English welcomed the drop in the unemployment rate. "I think it could go lower than that, but we have to keep creating the jobs to do it," he told media in Wellington. While it was hard for the government to directly influence the rate, English said businesses were investing more in training people for work.

Labour Party finance spokesman Grant Robertson focussed on the Stats NZ wage figures, noting the 1.6% annual rise was less than the 2.2% CPI inflation in the year to March. He said the 132,000 unemployed number was up by 31,000 since National took took office. The number of people unemployed for six months or more had trebled over that time to 43,200, he added.

Economists react

ASB chief economist Nick Tuffley said the employment data continued to paint a robust picture of the NZ labour market, with employment and participation growing and those unable to secure a job declining. 

"However, employment growth still does not appear strong enough to push wages significantly higher across the economy in general.  Wage pressures remain largely confined to tourism-related sectors and construction.  Continued record high levels of migration and a strong willingness to work amongst those of working age are keeping overall wage pressures depressed.

"We continue to expect the RBNZ to hold the [Official Cash Rate] at 1.75% at next week’s MPS, with the underlying data showing the labour market is still robust.  But, just as there are no grounds to cut the OCR, equally there is no reason to expect hastened OCR increases.  We expect the RBNZ to be on hold for an extended period, to late 2018."

ANZ senior economist Philip Borkin said after "surprises" in the fourth quarter figures from 2016, the latest data pointed to a labour market that is "back on script and more consistent with anecdote".

"...In other words, strong, with both the unemployment and under utilisation rates trending lower, and pointing to a market that is tightening. At this stage nominal wage growth remains benign, although we do believe conditions are set to change on that front too, with higher inflation, skill shortages, solid business sector profitability and the likes of the equal pay hospice workers’ settlement eventually providing a positive impulse.

"In saying that, we suspect the direct monetary policy implications from today’s figures are limited. While a tighter labour market does add to the case that the next move in the OCR will eventually be up, the RBNZ is going to want to see clear evidence that wage inflation is lifting (just like with broader measures of core inflation) before it reacts, and we suspect that evidence is going to appear only gradually." 

The employment figures come at a busy time politically, ahead of the government’s 25 May Budget and as election year enters full swing. Prime Minister Bill English is set to deliver a key set-piece speech later on Wednesday touching on the economy.

They also come as political parties on all parts of the spectrum are debating New Zealand’s population and immigration settings, and the effects these have on employment prospects. The Labour Party has also announced it will make the Reserve Bank target employment levels in the economy with its monetary policy tools if it wins the 23 September election.

Unemployment down, employment up

The unemployment rate fell to 4.9% from 5.2% in the December quarter, Stats NZ figures showed. Labour market statistics put the seasonally adjusted number of unemployed people at 132,000. This was down 0.8% from the same time a year ago.

Meanwhile, the number of employed people was estimated at 2,539,000 in the March quarter, up 5.7% from a year ago. From the December quarter, the number of employed people rose 1.2%, or by 29,000 people.

Over the same time since December, New Zealand’s labour force – those in work (employed) and those actively looking for it (unemployed) - grew by 23,000 people. The working age population grew by a seasonally adjusted 27,000 to 3,782,000. The labour force participation rate hit a new record of 70.6.

Underemployed and NEETs

Stats NZ said its under utilisation measure – the unemployed, underemployed, unavailable and available jobseekers – fell in the March quarter from December. The unadjusted under utilisation rate fell 0.3 points to 12.5%, representing 8,200 fewer people being underutilised. However, Stats NZ did note that the results were not statistically significant.

There was also a fall in the number of youth NEETs (not in employment, education or training). This measure of 15-24 year olds fell by 0.7 points to 12.8% of that age group (down by 4,000 people).

More specifically, the 20-24 year old NEET rate was 14.9%, down 2.2 points from December (8,000 fewer). This was led by 3,000 fewer ‘unemployed and not in education’, and 6,000 fewer who were ‘not in the labour force, not caregiving’.

In the 15-19 year old category, the NEET rate was 10.5%, up 0.9 points. This was the highest NEET rate for the age bracket since the March 2011 quarter, Stats NZ said. Of the 3,000 more people in the age group who were NEET in the March quarter, 2,000 were people ‘unemployed and not in education’, and 2,000 were ‘not in the labour force, not caregiving’.

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Other Stats NZ labour market figures showed annual wage inflation held steady at 1.6% during the quarter. Private sector wages though, at 1.5% annual growth, had their lowest rise since the June 2010 quarter, with the headline figure boosted by a 1.7% rise in public sector wages. [my emphasis]

Labour still not getting it's due share of touted GDP growth compared to capital? No amount of RBNZ "stimulus" will rectify this imbalance.

Labour costs data released by Stat NZ is an index which just tracks the average real wage movement with no detailed description on sector or market segment. When you factor in huge pay hikes in professional services and senior level management occupations, the lower end of the labour market are definitely worse off in terms of real wage growth.

yes and those at the bottom will be feeling the gap between wage growth and CPI the most
Annual wage inflation, as measured by the labour cost index (LCI), held steady at 1.6 percent in the March 2017 quarter. Over the same time period, the consumers price index (CPI) increased 2.2 percent.

10
up

The headlines in mainstream media share a sense of achievement to make sure we don't read too much into the details. The housing debate is given constant, undue attention than it deserves to distract us from more imminent threats to our economic landscape.
Employment up 5.7% while GDP up around 2% and per capita GDP down 0.3%. These are clear indications of collapsing productivity in general. It comes as no surprise that retail, accommodation and food services are the largest contributors to employment growth. A shift to a more labour-intensive, low wage economy is alarming but let's reserve our concerns just for the affordable housing discussion.
Who cares about our country turning into a sweatshop-led economy as long as we have a roof over our head!

Yep, if only these things were put into context for the layman.
Alas, they won't be and the smug headline will read "Unemployment down and GDP up".

Agree entirely with you and Advisor. I should add, Dear Leaders love bubbles as they're ultimately a robust driver of consumer spending. That spend is ultimately the crux of the NZ economy.

Agree entirely with you and Advisor. I should add, Dear Leaders love bubbles as they're ultimately a robust driver of consumer spending. That spend is ultimately the crux of the NZ economy.

so even though the percentage come down we now have more people unemployed?
since December, New Zealand’s labour force – those in work (employed) and those actively looking for it (unemployed) grew by 23,000 people.

and what about the ticking time bomb of the under 24 years unemployment figure, you know the ones that used to start out in the low wage employment and work there way up that have been replaced

Our banker ex-PM thinks it is wise to just write those off as drug-addled "non-performing assets" in our economic balance sheet. His successors are carrying his legacy forward in those respects.

Unemployment is down and the number of people in the work force is up - not the number of unemployed. The punctuation in the sentence isn't correct it should read: "Since December, New Zealand’s labour force – those in work (employed) and those actively looking for it (unemployed) - grew by 23,000 people."

Fixed - thanks guys,

Worth repeating ".......The punctuation in the sentence isn't correct it should read: Since December, New Zealand’s labour force – those in work (employed) and those actively looking for it (unemployed) - grew by 23,000 people......."

Gee - a country with one of the highest labour participation rates, and lowest unemployment rates, and we still have people who will look to find fault. I'm not sure if its a sign of just how good things really are comparatively, or just a case of a bunch of desperate politically driven whingers

So you think that whinging about whinging is more worthwhile than engaging in discussion?

What political party do you represent?

No, to the contrary I welcome constructive discussion dictator, I just didnt see any from some, But by example, those focused upon only a 1.6% labour cost index against inflation of 2.2%, which has been under 1% for the past 2yrs, and has only just got above 1.3% in the last quarter, sure isn't contributing that. My politics is irrelevant, does being balanced imply otherwise?

Grant A,

We keep being told just how buoyant our economy is,with the emphasis firmly on nominal GDP. Surely then,wage growth should be above 1.60%. That suggests to me that something is holding incomes back and what might that be? Could high levels of immigration be exerting a downward pressure on wage demands?

some interesting stats percentage may be down BUT the number of unemployed is up 9K
productivity has dropped, average hourly rate has dropped
part time employment down and youth unemployment up
http://www.tradingeconomics.com/new-zealand/youth-unemployment-rate

so we have both more working and more people unemployed and wages suppressed, how much is down to our high immigration policy settings

Great article about why under 25 unemployment is two or three times adult employment. It didn't use to be different and in some countries this has not changed. We have stuffed up big time.

But that’s not the only issue. “There’s a paradox,” says Dehaze, preparing for another stat attack. “There are millions of young people in Europe looking for work, but 40pc of employers say they can’t find people with the skills they need.

“Young people are learning the wrong things.”
The way to solve this crisis is to copy countries that don’t have a problem with youth unemployment.
“Germany, Austria, Switzerland, they have vocational training that’s aligned to the needs of business and don’t have youth unemployment problems.
“The new technology comes out and business talks to education so the latest robots come out and young people are trained on them – it’s self-regulating,” says Dehaze. “Companies are sending young people and paying for training, so they know what they want from it.”
So why are these countries getting it right where so many others are failing? “Three reasons,” says Dehaze. “There’s a tendency for the majority of countries to push students towards university, but where I live, Switzerland, 70pc do apprenticeships. Second, these countries do not stop you learning after an apprenticeship, you have the opportunity to continue to study and go on to university.”
He points out that Sergio Ermotti, boss of Swiss banking giant UBS, did an apprenticeship in banking. Adecco’s own global chief marketing and communications officer, Stephan Howeg, started at the age of 15 on an auto mechanic apprenticeship and then he decided to study history and philosophy.
Dehaze adds: “There is no floor and no ceiling with apprenticeships – you are not blocked – but in a lot of countries there is no possibility to continue to study after an apprenticeship.”

http://www.telegraph.co.uk/business/2017/04/30/black-rule-youth-unemploy...

Countries like Germany have a very strong manufacturing base, New Zealand on the other hand has been going downhill for 30 years. When we start to rely on things like tourism you know your in trouble, didn't work too well for Greece did it ? There are also loads of Degrees you can do that lead to a good job at McDonalds, that's how useful they are in this country. The shift has been away from Apprenticeships and getting into something like a Trade and getting your hands dirty, everyone now wants to sit about and push buttons on a keyboard.

Thank you Roger, it is surprising that so many choose university after high school and suspect that often whatever job offers follow are more linked to the job candidate having achieved a goal rather than any job specific knowledge gained - technical subjects excluded. A BA required for DOC field workers? A good trade is often more rewarding with good chances of running your own business.
Our local power company used to offer apprenticeships and electrical engineering scholarships to local school leavers. Now they mostly recruit electrical engineers from overseas while our young folk are left with fewer jobs and prospects. Not good!