- New Zealand unemployment tumbled to the lowest level in a decade in the September quarter as strong hiring acted to push the unemployment rate below 4%.
- The vast bulk of the decline in unemployment was due to younger Kiwis finding work.
- Despite sharply lower unemployment and underutilisation levels, wage pressures remained soft.
New Zealand unemployment tumbled to the lowest level in a decade in the September quarter as strong hiring acted to push the unemployment rate below 4%.
According to Statistics New Zealand (StatNZ), unemployment fell to just 3.9% in seasonally adjusted terms, the lowest level since the June quarter of 2008.
“For women, the unemployment rate fell to 4.0%, down from 4.6% last quarter,” StatsNZ said. “For men, the unemployment rate fell to 3.9%, down from 4.2%.
Markets were expecting unemployment to hold at 4.5%, above the 4.4% level in the June quarter that was previously reported at 4.5%.
“The fall in the unemployment rate in the latest quarter reflected a fall in the number of unemployed people, down 13,000, and a strong rise in employment, up 29,000,” StatsNZ said.
“This quarter’s employment rate rose to 68.3%, the highest rate since the series began more than 30 years ago.”
That means there are now more Kiwis of working age with a job than at any point on record.
StatsNZ said the decline in unemployment was driven by younger Kiwis finding work with 11,000 15 to 24-year-olds obtaining employment.
Making the steep decline in unemployment all the more impressive, it came despite an increase in labour force participation that rose 0.2 percentage points to 71.1%.
With unemployment tumbling, the underutilisation rate — a broader measure of slack within the labour market — also slumped to 11.3%, down from 12% in the prior quarter.
In normal circumstances, that would normally bode well on the outlook for wages.
However, despite a steep decline in the number of underutilised workers, private sector wages excluding bonuses rose by just 0.5%, seeing the increase on a year earlier decelerate to 1.9%, below the 2.1% level in the year to June.
Public sector wages grew at an even slower pace, increasing by just 0.4% over the quarter and 1.5% over the year.
“A key contributor to lower public sector wage inflation was the impending outcome of pay negotiations for teachers,” StatsNZ said. “Also, while the nurses’ collective agreement was ratified in early August, only a limited proportion of public sector nurses had received their wage rises by the middle week of August.”
So the weakness may only be temporary, in other words.
“Wages will rise over the next year,” said Jarrod Kerr, Chief Economist at Kiwibank.
“Inflation is on the rise, so workers have more reason to argue for higher pay. There are chunky minimum wage hikes scheduled over coming years and, as highlighted by today’s figures, the labour market is tight. Tight labour markets generate wage pressure.
“There’s plenty for the RBNZ to mull over.”
The Reserve Bank of New Zealand (RBNZ) has previously stated that the next move in official interest rates could be either higher or lower. Given the strength of the jobs report, there’s now a good chance the bank could drop this view when it announces its November interest rate decision on Thursday.
“Today’s data clearly provide officials with even less domestic cover to maintain their dovish guidance,” says Tom Kennedy, Economist at JP Morgan.