New Zealand Unemployment Rate Falls to Lowest in Nine Years

(Bloomberg) -- New Zealand’s jobless rate fell to a fresh nine-year low in the first quarter, adding to signs that sluggish wage growth will eventually pick up.

The jobless rate fell to 4.4 percent from 4.5 percent in the previous three months, the lowest since the final quarter of 2008 and in line with economists’ forecasts. Employment rose 0.6 percent and the participation rate fell to 70.8 percent, Statistics New Zealand said Wednesday in Wellington.

Lower unemployment and falling immigration may lift wages and start to generate broader price pressures. Still, with inflation languishing near the bottom of the 1-3 percent target range, the Reserve Bank has signaled it’s unlikely to raise interest rates until mid-2019. The government last month gave the central bank the extra goal of supporting maximum sustainable employment alongside price stability.

“The tight labor market currently looks to be in little need of policy stimulus to meet employment objectives” in the RBNZ’s new remit, said Nick Tuffley, chief economist at ASB Bank in Auckland. Still, “the figures depicted a mild wage backdrop, with few signs of widespread wage pressure. This keeps notions of official cash rate hikes on the back-burner,” he said.

New Zealand’s dollar fell after the report. It bought 69.98 U.S. cents at 12:03 p.m. in Wellington from 70.08 cents immediately before the release.

New Zealand Unemployment Rate Falls to Lowest in Nine Years

Employment kept pace with the increase in the working-age population, the statistics agency said. The key details were:

  • Employment growth accelerated from a revised 0.4%; economists expected 0.6%
  • Employment rose 3.1% from a year earlier; economists forecast 3.3%
  • Participation rate slowed from a revised 70.9%; economists expected 71%
  • Filled jobs dropped 0.2% q/q

Wage inflation was benign with signs of growth emerging in a handful of industries including agriculture and construction, the data showed. The new Labour-led government raised the minimum wage on April 1 and is proposing industrial relations reforms which may fan faster increases in worker incomes, economists say. The key details of the wages data were:

  • Non-government ordinary time wages rose 0.3% q/q; economists expected 0.5%
  • Non-government ordinary time wages rose 1.9% y/y, matching the previous quarter

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