NZ unemployment rate tumbles to decade-low 3.9%

New Zealand’s jobless rate unexpectedly tumbled to its lowest level in a decade in the September quarter as the labour market remains tight. The New Zealand dollar rose.

The seasonally adjusted unemployment rate fell to 3.9 percent in the three months ended Sept 30 from 4.4 percent in the June quarter, Statistics New Zealand said in its household labour force survey.

The number was well below the 4.4 percent forecast in a Bloomberg poll of 13 economists and was the lowest it has been since the June quarter in 2008 when it was 3.8 percent, Stats NZ said.

The employment rate meanwhile was 68.3 percent in the September quarter, up from 67.8 percent in the June quarter and the highest recorded rate ever.

“While this quarter’s unemployment rate is outside market expectations, we know New Zealand has a small economy with a dynamic labour market and large changes, both up and down, have happened before,” labour market and household statistics senior manager Jason Attewell said.

The number of employed people rose 1.1 percent in the quarter to 2.66 million and was 2.8 percent higher than a year earlier.

While more people secured jobs, wage inflation remained fairly tepid. According to Statistics NZ, private sector wage inflation – including overtime - rose 0.5 percent in the quarter for a 1.9 percent annual increase, in line with expectations.

Public sector wage inflation was up 0.4 percent in the quarter for a 1.5 percent annual gain. A key contributor to lower public sector wage inflation was the impending outcome of pay negotiations for teachers. 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 the month.

Across both sectors, wage inflation rose a quarterly 0.5 percent and an annual 1.8 percent, slightly below September quarter annual inflation of 1.9 percent.

A record flow of migrants over the past several years has helped keep a lid on wage inflation even as the labour market has tightened.

While the unemployment rate will have surprised the central bank, subdued wage inflation will likely add to the view it will continue to signal a flat interest rate track at tomorrow's review.

The RBNZ now has the additional goal of "supporting maximum levels of sustainable employment within the economy" to the existing goal of price stability.

The participation rate was 71.1 percent in the September quarter, up 0.2 percentage points versus June, and flat on the year. Economists had expected a participation rate of 70.9 percent, according to the Bloomberg poll.

The under-utilisation rate, which measures the country's potential labour supply and unmet need for work, fell to 11.3 percent from 12 percent in the prior quarter.

Total actual hours worked was unchanged on the quarter at 89.9 million and was up 2.2 percent on the year.

The quarterly employment survey, also released today, showed private sector ordinary time average hourly earnings rose 1.4 percent to $29.38 in the September quarter and were 3.6 percent higher than a year earlier. Public sector ordinary time wages rose 0.7 percent to $39.31 in the September quarter and lifted 1.6 percent on the year.

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