UPDATED: Strength of NZ labour market stokes rate hike talk
UPDATED: Strength of NZ labour market stokes talk of rate hikes; kiwi gains
By Paul McBeth and Tina Morrison
Nov. 6 (BusinessDesk) - New Zealand’s jobless rate fell more than expected in the third quarter as companies took on workers, stoking speculation strength in the labour market will feed inflation and give the central bank more reason to hike interest rates next year. The kiwi dollar jumped.
The unemployment rate slipped to 6.2 percent in the three months ended Sept. 30 just below the 6.3 percent forecast in a Reuters survey of economists, and down from 6.4 percent in the June quarter, according to Statistics New Zealand’s Household Labour Force Survey.
The labour market got a boost, with 1.2 percent growth in employment, beating estimates of 0.6 percent, led by gains in retail, accommodation and food services, and the construction sector. Those gains were primarily in Auckland and Christchurch, the country’s two biggest cities, which are also facing construction booms. Full-time employment rose 1 percent and part-time jobs grew 1.1 percent.
New Zealand’s participation rate rose to 68.6 percent in the September quarter from 68.1 percent in the previous quarter, against the backdrop of increasing net migration. The labour cost index, which measures wage inflation, rose 0.5 percent across private and public sectors and including overtime.
The New Zealand dollar jumped to 83.63 US cents from 83.28 cents immediately before the 10:45am report. The kiwi rose to 87.70 Australian cents from 87.60 cents before the report.
“All in all, it's a sign of growing strength in the labour market - still not really seeing any signs of burgeoning wage pressure but this is very much what you would expect to see at this point in the cycle,” said Mike Jones, currency strategist at Bank of New Zealand. “These figures won't have gone unnoticed down at the Reserve Bank and, again, more pressure on them to raise rates in the first half of next year."
Ordinary time private sector wage inflation increased 0.4 percent in the quarter, and was up 1.6 percent on an annual basis.
The gains in the labour market come as the outlook for the economy improves on the prospect of major construction work in Auckland and Christchurch, and upbeat outlooks among businesses.
“Overall, the employment figures highlight the broadening nature of the economic recovery,” said Jane Turner, senior economist at ASB. “Given the recent lift in CPI, the RBNZ can be confident inflation pressures have turned. We continue to expect the RBNZ will lift the OCR from March 2014.”
The primary sector was a weak spot. Jobs in agriculture, forestry and fishing fell to 138,700 in the September quarter from 147,100 from June. The primary sector was hit by the worst drought in 70 years during the summer.
Total hours worked rose 1.6 percent to 76.11 million hours in the quarter, and were up 3.8 percent on an annual basis
The Quarterly Employment Survey, also released today showed ordinary time private sector wages rose 1.6 percent to $25.91, and were up 2.6 percent on an annual basis, outpacing the 1.4 percent growth in public sector wages to $35.33. Average weekly paid hours for full-time equivalents ordinary time rose 1.4 percent to $1,050.05.
New Zealand’s unemployment rate ranked 13th lowest among developed nations, below Israel and above Denmark.