The first quarter unemployment data was released by Statistics New Zealand last week. According to official data, the New Zealand unemployment rate fell to a nine-year low in the first three months of the year ending March 2018. The positive data added to the view that maybe New Zealand’s sluggish labor market was eventually picking up.
The unemployment rate fell to 4.4% from 4.5% from the previous quarter. This was the lowest unemployment rate since the final quarter of 2008 and was in line with the median estimates. The employment indicator was seen rising 0.6% in the same period while the participation rate eased to 70.8%.
The lower unemployment rate amid falling immigration is leading to a positive outlook that could see wage growth rising and pushing the underlying inflation higher. However, New Zealand’s inflation rate was seen just below the 1% – 3% inflation target band that the Reserve Bank of New Zealand is targeting.
The seasonally adjusted underutilization rate was seen falling to 11.9% compared to 12.2% seen in the previous quarter ending December 2017. Statistics New Zealand also estimated that approximately 340k people were in a position to take on more work hours. This was a decline by 5000 from the previous quarter.
The data suggested that New Zealand firms were finding it difficult to find new workers with the pool of available workers narrowing over time. Wage growth was seen rising just 0.3% on the quarter. This was well below the economists’ expectations. On an annual basis, the labor cost index was seen rising 1.9%.
The RBNZ had previously signaled that rates will be unchanged until the middle of next year. The New Zealand’s government gave the central bank an additional mandate of seeking stable employment growth besides targeting price stability.
Following the release of the unemployment data, the RBNZ’s remit said that the tighter labor market conditions point to little need of monetary stimulus in order to meet the employment objective. The labor market figures showed that there was a mild decline in wage growth and few signs of wage pressures.
This indicated that there was further slack in the labor market that could be absorbed and could take a few quarters to reflect the wage pressures.
The labor market data showed that employment growth had accelerated from a revised 0.4%. This was slightly below the forecasts of a 0.6% increase. From a year ago, employment was seen rising 3.1% which was slightly lower than the median estimates that expected to see a 3.3% increase over the period.
The filled jobs report was seen falling 0.2% on the quarter. Inflation in wages was seen to be muted but there were signs that growth would emerge especially in a few industries including agriculture and construction.
New Zealand’s government increased the minimum wage which was effective April 1 and the government was also seen proposing industrial reforms that could stoke a faster pace of income growth among workers.
The New Zealand dollar was seen weakening after the jobs report release. The NZDUSD has been in a steady downtrend as price fell from around 0.7350 last month to test a 5-month low at 0.6985 last week.
The RBNZ’s monetary policy meeting is scheduled for later today at 21:00 GMT. No changes to interest rates are expected and the central bank is likely to keep its monetary policy statement unchanged as well.
