NZ jobless rate keeps Bollard on course for September hike
By Paul McBeth and Jason Krupp
Aug. 4 (BusinessDesk) – New Zealand’s unemployment rate of 6.5% in the second quarter will keep Reserve Bank Governor Alan Bollard looking at September for a 50 basis point rate hike as local data supports the local economic recovery.
The jobless rate was flat in the three months ended June 30 after it was revised down 0.1 percentage point in the March quarter, according to Statistics New Zealand’s Household Labour Force Survey. That’s lower than the 6.6% forecast in a Reuters survey which was predicting no change in the unemployment rate, and has come down 0.4 percentage points in the past year.
The faster than expected economic recovery has removed the need for Bollard’s emergency cut in March, when he shaved half a percentage point from the official cash rate to 2.5%.
“It is close enough to expectations not to disrupt the domestic case being made for a hike,” said Darren Gibbs, chief economist at Deustche Bank NZ. “If we don't get a hike in September it won't because of domestic data, it'll be because of what is happening offshore.”
Bollard has warned any further hikes may not be needed as a surging currency keeps inflation in check and stops economic growth from booming out of the control. The kiwi dollar was little changed at 86.53 U.S. from 86.46 cents immediately before the announcement. It got as high as 88.40 cents earlier this week.
Traders are betting Bollard will lift rates by 88 basis points over the coming 12 months, according to the Overnight Index Swap curve.
The number of people employed was steady at 2.21 million, and has grown 2% over the past 12 months. Labour force participation fell 0.2 percentage points to 68.4%, as expected, with more people joining the labour.
Still, Bollard will be watching the rebuild in Canterbury, with today’s data showing an additional 6,400 people were employed in the construction sector at 171,100.
The data captured the impact of the Canterbury earthquakes, with the number of hours worked falling 1.3% in the 12 months through June. The unemployment rate rose 0.9 percentage points over the year, but was still lower than the national figure at 5.7%.
Education and training sectors added almost 10,000 in the quarter at 206,000, echoing the Quarterly Employment Survey’s findings earlier this week. The retail sector continued to struggle in the period, shedding 22,000 people to employ 325,800 in retail trade and accommodation.
Total hours worked in the quarter rose 1.6% in the June quarter to a seasonally adjusted 74.2 million hours, that’s the most since June 2008 before the global financial crisis plunged the world into recession.
Full-time employment rose 0.2% in the quarter, while part-time employed declined 0.1%. Full-time employment makes up about 77% of the labour force.
Still, youth unemployment remained significantly higher than the national figure, with 27.6% of 15- to 19-year-olds unemployed and 11.2% of 20- to 24-year-olds out of work.
New Zealand’s unemployment rate was the 12th lowest among developed nations, equal with the Czech Republic.