New Zealand unemployment jumped last quarter as more Kiwis looked for work

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New Zealand’s unemployment rate jumped in the December quarter, driven by a large increase in labour market participation.

According to Statistics New Zealand (SNZ), the unemployment rate rose to 5.2% in seasonally adjusted terms in the final quarter of the year, a 0.3 percentage point increase on the level of the previous quarter.

However, rather than being driven by a decline in employment, the increase in unemployment was driven by a surge in the size of New Zealand’s labour force.

SNZ said that labour force participation rate increased 0.4 percentage points over the quarter to 70.5%, the highest level on record.

That means that 70.5% of New Zealand’s working age population are currently in or looking for work, well above the 64.7% level in Australia.

The figure indicates that strength in labour market conditions are encouraging more people into the labour market.

That was reflected in employment growth during the quarter. It grew by 0.8%, or 19,000, and followed a 1.3% increase in the previous quarter.

And that increase was driven by a surge in full-time employment, rising by 32,000, or 1.6%. In comparison, part-time employment fell by 12,000, or 2.2%.

“The retail trade, accommodation, and food services industry was the largest contributor to employment growth over the latest quarter,” said SNZ. “This was followed closely by the construction and the professional services industries.”

However, despite the strong employment gain, labour market underutilisation — combining both unemployed and underemployed workers — rose by 25,900 over the quarter.

SNZ said the increase came from more people being unemployed, and more people actively seeking work but not currently being available to work.

The increase in underutilisation may help explain subdued growth in employment costs with the labour cost index rising just 1.6% from the same quarter a year earlier.

“Although employment has grown, the growth in wages has remained steady,” said Mark Gordon, labour and income statistics manager at SNZ, adding that annual wage inflation has been 1.5 to 1.6% for the last seven quarters.

SNZ also said that average hourly earnings increased by just 1.3% over the year, the lowest increase seen since September 2010.

The New Zealand dollar has fallen fractionally following the release of the report.

The NZD/USD currently trades at .7294, down 0.16% for the session.

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