Weekly Overview February 4 2016
Labour Market an Area of Strength
Two weeks ago I listed reasons why despite the dairying downturn growth in the NZ economy would remain good especially compared with other countries and this would limit scope for lower interest rates, support jobs growth, and keep the NZD from falling much.
This week has brought a surge in others saying the same thing. One trigger was the better than expected labour market numbers yesterday showing a fall in the unemployment rate from 6% to 5.3% and 0.9% jump in jobs in the December quarter despite dairying weakness. Another was the jump in net migration over calendar 2015 to 65,000 or 1.4% of the population from a negative flow during 2012.
Regarding interest rates the Reserve Bank Governor yesterday reminded everyone that the RB concentrates not just on the headline inflation rate of 0.1% when setting policy, but core inflation which is currently near 1.6% or so, and issues of financial stability and avoiding volatility. His comments have reduced growing expectations of another rate cut and helped the NZD to end this afternoon two cents higher than a week ago against the Australian and US dollars.