Unemployment rate increases to 3.6% for latest quarter

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Unemployment has edged up slightly but the labour market and wages show few signs of deteriorating soon.

Stats NZ reported unemployment at the end of June was 3.6 percent from 3.4 percent in the previous quarter, with record numbers employed, and there was strong job growth, especially in the tourism sector.

About 28,000 jobs were added in the June quarter and 113,000 for the year, more than expected and driven by demand in the tourism industry.

“Despite its small size, a quarter of all annual employment growth was recorded in key tourism-related industries,” Stats NZ senior manager Becky Collett said.

Employment in tourism-related industries was back to pre-Covid levels, and accounted for nearly 10 percent of all the people employed in the economy.

One measure of slack in the jobs sector, the underutilisation rate, which includes those without work or wanting more work, rose to 9.8 percent from 9 percent.

“Despite the strong quarterly increase, the June 2023 quarter underutilisation rate remains relatively low compared with historic averages,” Collett said.

Infometrics principal economist Brad Olsen said the labour market had gone from extremely tight to very tight.

“The rise in the unemployment rate … resulted from a larger increase in people looking for work than the increase in jobs available. The rise wasn’t due to a large loss of jobs, as employment rose by 28,000 people.”

Wage growth peaked

Wage growth eased from the record highs of the previous quarter but remained high, with the labour cost index dipping slightly to a 4.3 percent annual rate, while another measure using hourly pay rates beat inflation, rising 6.9 percent.

BNZ head of research Stephen Toplis said the softer than expected wages numbers was probably one of the more significant parts of the data.

“We thought there was a significant chance wage growth would surprise the RBNZ to the upside. Instead, the outcome strongly supports the bank’s forecast that wage growth has well and truly peaked.”

He said overall the data pointed to the labour market easing as desired, albeit slowly, with the influx of migrants filling job shortages without adding pressure to wages.

The labour market was usually one of the last parts of the economy to slow down, and the RBNZ has been anxious for a softening and forecasting a rise in unemployment beyond 5 percent next year.

Economists were not expecting any response from the central bank in its next monetary policy statement on 12 August, and although most believe the RBNZ has ended its cash rate hikes at 5.5 percent, ANZ economists see at least one more rise on the horizon.

“We continue to expect the RBNZ will raise the OCR once more in November.

“We expect Q3 CPI (consumer price index) and labour market data in the lead-up to the decision will highlight sticky domestic-driven inflation, reflecting capacity pressures taking longer to dissipate than the RBNZ’s May forecasts assumed,” they said in a note.