New Zealand unemployment rate rises to 4.3% in December 2018 quarter

RBNZ rate cut speculation back on the table following a weak labor market report

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The latest unemployment report from New Zealand showed a disappointing performance from the labor market for the period.

Data released by Statistics New Zealand showed that the unemployment rate rose to 4.3% which was higher than expected.

The fourth quarter unemployment rate scored higher compared to the revised unemployment rate of 4.0% during the third quarter. Previously, the unemployment rate had fallen to 3.9% marking a decade low during the third quarter.

New Zealand labor market summary

New Zealand unemployment rate
New Zealand labor market summary, December 2018. Source: Stats NZ

The median estimates polled by economists forecast that the unemployment rate would rise to 4.1% for the reported period.

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Other data released included the quarterly employment growth rate. The employment change grew just 0.1% quarterly. This was a sharp decline compared to the 1.1% employment growth registered in the third quarter.

Economists were expecting to see the employment growth rise by 0.3% during the quarter.

Overall, the data simply reversed most of the gains from the previous quarter portraying that the jobs market perhaps slowed amid muted wage growth.

New Zealand’s labor force participation rate fell slightly to 70.5% from 71.1% previously. The underutilization rate rose to 12.1 percent in the December 2018 quarter, up from 11.4 percent in the previous quarter.

The labor market data comes ahead of this week’s monetary policy meeting from the Reserve Bank of New Zealand. Forecasts show that the RBNZ will be leaving its interest rates unchanged at record lows of 1.75%.

The soft jobs report and the number of hours worked potentially increases the risk of a weak GDP report for the December quarter.

The December quarter’s labor market report represents the jobs market for the year and shows that the labor market grew only so slightly while the unemployment rate was 0.2 percentage points below the previous year.

The labor cost index report showed a modest increase of 0.5% in the quarter while the annual growth was at 1.9%. The labor cost index (LCI) increased 1.9 percent on the year through the December 2018 quarter

The weak jobs report comes despite the fourth quarter data showing that inflation had edged higher in the fourth quarter. Investors scaled back the speculation of a rate cut later this year following the uptick in inflation.

However, the latest labor market data could potentially put the talks of a rate cut back on the table.

What about the data?

Statistics New Zealand said that some of the data adjustments were required in the fourth quarter to improve its reporting accuracy. This included adjusted figures for employed people which covers those who are not in the labor force and also accounting the number of hours worked.

Without the adjustments, Statistics NZ said that New Zealand’s unemployment rate would have risen to 4.4% rather than the reported 4.3%.

Jason Atwell from Statistics NZ said that the fourth quarter unemployment rate was back in line with the rates seen in September 2017 and June 2018 quarters.

Following the release of the labor market data, the New Zealand dollar dropped to a two-week low at $0.6773.

Following the release of the unemployment numbers, economists were quick to adjust their expectations. Ben Jarmon, an economist from J.P. Morgan, said that the market was increasingly dovish on the RBNZ during the summer of last year.

The recent jobs report provided significant data for the RBNZ ahead of its meeting this week. Jarman said that the weaker global economy and the dovish Fed guidance could give the RBNZ’s policymakers enough reasons to talk about the downside risks.

The RBNZ will be holding its monetary policy meeting on February 12th.



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