Unemployment rises to 4.2%, but wage rises pick-up

Wednesday, 6 November 2019

Unemployment is on the rise but under-employment among part-time workers has fallen, Statistics NZ has reported.

Unemployment jumped to 4.2 per cent at the end of September, Statistics NZ has reported.

But those in work appear to be getting more hours and are being better paid, leaving banks still divided on whether the Reserve Bank will cut interest rates next week.

ASB said Statistics NZ's latest labour market data showed nominal wage growth – which does not reflect inflation – had hit a 10-year high as a result of wage settlements agreed during the quarter.

The unemployment figure, which is seasonally adjusted, was up from 3.9 per cent at the end of June.

But the seasonally-adjusted 'underutilisation' rate, which is a broader measure of under-employment, fell to 10.4 per cent, which was its lowest level since June 2008, Statistics NZ reported.

Westpac says, overall, the labour data will be a modest positive surprise for the Reserve Bank, and is tipping it will keep rates on hold next week.

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Statistics senior manager Paul Pascoe played down the significant of the increase in the headline unemployment rate.

'While the unemployment rate has returned to the level seen in the March 2019 quarter, it has largely been tracking down since late 2012,' he said.

The number of part-time workers who say they want to work more hours but can't, has fallen to fewer than 300,000 for the first time in 10 years.

'Labour market data is most useful when placed in the context of a time series.'

The fall in underutilisation was driven by a drop in the number of people who worked part-time but were looking to work more hours, he said.

When seasonally-adjusted, the number of people who were underutilised fell by 18,000, to 295,000 at the end of September.

That marked the first time since March 2009 that the number of underutilised people had been below 300,000.

The seasonally-adjusted employment rate, which measures the proportion of working-age adults who are in employment, remained steady at 67.5 per cent.

ASB said unemployment was still 'low' and the data remained consistent with 'a broader pick-up in wage growth'.

The labour cost index, which measures changes in salaries and wage rates including overtime, increased 2.4 per cent during the year to September 30, Statistics NZ said.

In the year to September, 48 per cent of salary and wage earners had achieved a wage increase above 2 per cent during the previous 12 months, with 40 per cent reporting no annual increase, ASB said.

The latter figure was the lowest in 10 years, it said.

Median pay increases remained at 3 per cent, which was the same as the 'lofty' figure reported last quarter, it said.

Of some interest to the Reserve Bank may be a 0.6 percentage-point acceleration in the private-sector labour cost index, which rose 2.3 per cent.

ANZ said the unemployment rate was a touch higher than the market had expected, but it didn't expect the overall data to be a 'game changer' as the Reserve Bank considers whether to cut interest rates again next week.

ASB and ANZ continue to expect the Reserve Bank to cut the Official Cash Rate (OCR) to 0.75 per cent on November 13.

But Westpac senior economist Michael Gordon said the labour market data represented a 'modestly positive surprise' for the Reserve Bank and supported Westpac's changed view that the bank would now leave rates on hold next week.

BNZ plans to make its OCR forecast later this week.