New Zealand Jobless Rate Unexpectedly Falls on Hiring Bounce

(Bloomberg) -- New Zealand’s unemployment rate unexpectedly dropped in the fourth quarter as the economy’s V-shaped rebound from recession encouraged hiring. The local dollar jumped.

The jobless rate fell to 4.9% from 5.3% in the third quarter, Statistics New Zealand said Wednesday in Wellington. Economists expected an increase to 5.6%. Employment rose 0.6% from the previous three months, much more than the 0.1% median forecast.

New Zealand’s success in combating the coronavirus allowed a rapid economic recovery in the second half of 2020, which has in turn fueled job growth and boosted business confidence. Surveys suggest the labor market will continue to recover, adding to signs that there is less need for the central bank to add more stimulus.

The kiwi dollar climbed about a third of a U.S. cent after the report. It bought 71.97 cents at 1:12 p.m. in Wellington.

The Reserve Bank, which is required to support maximum employment as well as stable inflation, will assess whether the economy needs additional support at its Feb. 24 policy decision. In November, it projected the jobless rate would rise to a high of 6.4% this year. A majority of economists now expect it to keep the official cash rate at 0.25% and stay on hold for the foreseeable future.

“The RBNZ is now suddenly much closer to achieving its two monetary policy objectives than it thought it would be at this point in the cycle,” said Mike Jones, senior economist at ASB Bank in Auckland. “Last year’s flood of RBNZ stimulus has done the trick, and no more is required.”

Employment Gains

New Zealand’s economy returned to pre-covid levels in the three months through September, encouraging more people to start looking for jobs. However, the border remains closed to foreign visitors, hurting the key tourism industry.

Neighboring Australia is also enjoying a V-shaped recovery as Covid-19 is all-but suppressed, boosting confidence and fueling spending and hiring. Its unemployment rate at the end of 2020 was 6.6%, down from a pandemic peak of 7.5%.

New Zealand employment rose for the first time in three quarters, and also gained 0.7% from a year earlier. Economists had forecast an annual decline.

The participation rate increased to 70.2% from 70.1% in the three months through June. Economists projected 70.3%.

Statistics New Zealand said the underutilization rate, which is a broader gauge that includes people not looking for work, fell to 11.9% from 13.2% in the third quarter.

Ordinary time wages for non-government workers rose 0.5% in the quarter, the statistics agency said. From a year earlier, wage growth slowed to 1.5%.

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