- New Zealand’s unemployment rate fell to 4.4% in early 2018, the lowest level in nearly a decade.
- Employment rose strongly and labour force participation fell, helping to reduced the number of unemployed and underemployed workers.
- Despite that news, wage growth remained weak.
New Zealand unemployment has fallen to the lowest level in a decade.
According to Statistics New Zealand (StatsNZ), the nation’s unemployment rate fell to 4.4% in the March quarter in seasonally adjusted terms, leaving it at the lowest level since the December quarter of 2008.
The figure was below the 4.5% level seen in the prior quarter. It was expected to remain at 4.5%, according to economists polled by Reuters.
Male and female unemployment stood at 3.9% and 4.9% respectively, down from 4% and 5% in the December quarter of 2017.
Total unemployment fell by 3,000 to 119,000.
The drop in unemployment was driven by stronger-than-expected employment growth and a small dip in labour market participation.
StatsNZ said employment grew by 15,000, or 0.6%, to 2.618 million in seasonally adjusted terms. Markets had been expecting a smaller increase of 0.4% during the quarter.
Female employment grew by 0.8%, double the 0.4% increase for males.
Over the year, employment grew by 3.1%.
Further helping to reduce the unemployment rate, labour force participation dipped from 70.9% to 70.8%, slightly lower than what economists were looking for.
In absolute terms, the size of the labour force increased by 12,000 to 2.738 million. This measures the number of people either in or actively seeking employment.
Mirroring the decline in the unemployment rate, the underutilisation rate — including both unemployed and underemployed persons — also declined, falling to 11.9% from 12.2% in the prior quarter.
“The fall in underutilisation mainly reflects 9,000 fewer people being underemployed, which included 8,000 fewer women,” StatsNZ said. “People who are underemployed are those in part-time employment who want to, and are available to, work more hours.”
However, despite the decline in underutilisation — suggesting that excess spare capacity in the labour market is being reduced — wage pressures remained weak.
StatsNZ said the Labour Cost Index (LCI) rose by just 0.3% during the quarter, below the 0.4% level expected, leaving the increase on a year earlier unchanged at 1.9%.
“Without the aged-care worker settlement last year, [annual wage growth] would have been just 1.6% — much the same rate of growth that it has seen for the last several years,” said Michael Gordon, Senior Economist at Westpac.
“Notably, the share of workers receiving no pay increase at all has been trending higher in the last few years, and is now at its highest since 2010, which was in the wake of the Global Financial Crisis.”
Gordon says this suggests the labour market may not have reached its non-accelerating inflation rate of unemployment (NAIRU), the level where wage pressures typically accelerate.
That’s what financial markets have focused on following the release of the report, rather than the beat in unemployment and employment growth.
The NZD/USD is trading fractionally lower at .6995, a decrease of 0.11%.
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