Unemployment falls to 3.2%, wage rises lag inflation

Wednesday, 2 February 2022

The official unemployment rate is based on a survey by Stats NZ. To count, people must have actively looked for work in the previous four weeks.

The official unemployment rate has sunk to 3.2 per cent, which is its lowest level since comparable records began in 1986, but wage rises remain subdued.

The unemployment rate is down from the 3.4 per cent figure Stats NZ reported the previous quarter but which it has now revised down to 3.3 per cent.

The labour market data for the three months to the end of December will be raked over by economists who are keen to assess the degree to which rising inflation may be impacting people’s wage expectations.

ASB senior economist Mark Smith said its first take on the numbers was that wage growth was more moderate than expected.

But he forecast more sizeable rises to come this year “as workers seek compensation for the skyrocketing cost of living”.

Westpac acting chief economist Michael Gordon also said the pick-up in wage growth was less than it had expected.

“Today’s results – with unemployment no lower than what the Reserve Bank expected, and wage growth softer – should further downplay the risk of the Reserve Bank picking up the pace of hikes,” he said.

Stats NZ said its Labour Cost Index, a broad measure of salary and wage costs, rose at an annual rate of 2.6 per cent in the quarter, up from an annual rate of 2.4 per cent in the September quarter.

Those figures confirm labour costs are rising at a much lower pace than inflation which hit an annual rate of 5.9 per cent in the same December quarter.

“Big pay rises are less widespread than the anecdotes would suggest – most likely concentrated in more specialised roles, where workers have more power to name their price in a tight market,” Gordon said.

“And without widespread pay increases, there’s perhaps less risk of a persistent wage-price spiral developing.”

Despite falling official unemployment, Stats NZ said the “underutilisation” rate, which is a broader measure of unemployment and underemployment, remained unchanged from the previous quarter at 9.2 per cent.

The proportion of people in employment was also unchanged at 68.8 per cent.

Average ordinary-time hourly earnings rose to $35.61, up from $35.25 in the previous quarter.

Stats NZ senior manager Becky Collett said “some of the largest increases in employment over the year came from young people”.

“For instance, more 15 to 19-year-olds were employed in retail trade and accommodation and food services over the course of 2021.”

Stats NZ said 46.3 per cent of employed people it surveyed in the December quarter thought there was almost no chance of them involuntarily losing their job or business in the next 12 months, up from 42.5 per cent who gave that response the previous year.