Unemployment still at near-record low of 3.3%

Wednesday, 2 November 2022

The official unemployment rate remained unchanged at 3.3% in the three months to the end of September but by other measures the labour market has strengthened, Stats NZ has reported.

The data also showed wage rises were increasing, by some measures to at least a 33-year high.

Separately, the Reserve Bank issued a warning about rising mortgage rates and falling house prices on Wednesday.

The unemployment rate held steady as the proportion of people in employment and the proportion of people who Stats NZ classed as officially unemployed both rose, with fewer people counting themselves out of the labour market entirely by telling Stats that they didn’t have jobs and weren’t available for work.

The proportion of New Zealanders who are in employment rose to 69.3%, from 68.6% the previous quarter, which is the highest on record since Stats NZ began collating comparable statistics in 1986.

**READ MORE:

* Reserve Bank issues negative equity warning

* Individuals' tax bill up 55% in five years

* Here's what unemployment data this week might mean for interest rates

**

The figures reinforced assumptions among bank economists that the Reserve Bank would see a need to take tougher action to bring down inflation by raising the official cash rate to 5% or higher next year.

But Finance Minister Grant Robertson said they were “certainly good for the people in work”.

“I understand for businesses, many of them have had difficulty hiring the staff that they need. We've been working hard to make sure we train people up, give them the skills and through immigration are able to address that.

“I'm never going to stand here today and not celebrate having low unemployment,” he said.

Stats NZ said the employment rate for women rose to 64.9% in the September quarter, which was also a recent record high.

In another sign of the strong labour market, the underutilisation rate, which records the proportion of people who are unemployed or who would like to work more hours, dipped to 9%, from 9.2% in the June quarter.

There were growing signs that the strong labour market was resulting in wage rises starting to catch up with inflation, which was last measured at 7.2%.

Stats NZ reported an annual increase of 5.3% in the labour cost index, up from 5.1% in the June quarter, or a 3.7% increase once it attempted to adjust that to take into account changes in the jobs people did that could reflect higher productivity.

Average hourly earnings, excluding overtime, which is another measure of wages closely watched by some economists, rose by 7.4% over the year – slightly more than inflation – to reach $37.86 an hour.

Stats NZ manager Darren Allan said that rise was the highest since at least 1989 and was driven by an 8.6% jump in average ordinary hourly-earnings in the private sector.

ASB economist Nat Keall said more people were receiving what he described as “massive annual increases”.

“A whopping near-third of jobs experienced an increase of more than 5%,” he said.

Council of Trade Unions economist Craig Rennie agreed the data showed the labour market was strong and said workers should be in “prime position”.

“It’s a good time to be a worker.”

But he said the wage growth was unevenly distributed.

The annual rise in average ordinary time earnings in the public sector was “constrained” at 4.1%, he said, with education workers getting only 2.1%.

Westpac acting chief economist Michael Gordon said they showed the Reserve Bank still faced “a major task in bringing domestic inflation pressures under control”.

The growth in jobs had been concentrated among the very young, he said.

“There was a sharp lift in the number of people working while studying and a strong rebound in the share of part-time work.

“While a lift in youth employment is certainly not unwelcome, these results demonstrate how few remaining avenues businesses have to find more workers,” he said.

BNZ research head Stephen Toplis said the labour market was so tight and “inflation so income-sapping” that people who might otherwise choose not to work were being forced into employment.

“With payments often in excess of $20 an hour the returns will feel like a pot of gold for some youth, especially those who have become disenfranchised from the education system,” he said.

”For some, entering the workforce is a very sensible option and the tight labour market will offer a future that might once have felt beyond reach. But, for others, the lure of the dollar will be depriving them of an education that might set them up better in later life.”

ANZ chief economist Sharon Zollner said the figures tilted the odds further towards a 75 basis point rise in the OCR in February as well as next month.

Robertson said average hourly earnings rising faster than inflation was a positive outcome.

But National Party leader Christopher Luxon – focusing on the much slower growth in the adjusted labour cost index – said the wage data showed New Zealanders were “continuing to go backwards”.

It was great to see unemployment staying low but rapidly rising interest rates were going to cause a lot of pain, he said.

Just under 53% of workers told Stats NZ they felt there was “almost no chance” of them losing their job or business in the year ahead, a significant increase from the total of just under 46% who thought that in the same quarter last year.

Stats NZ manager Becky Collett said the increased confidence over job security coincided with an increase in the proportion of workers who had permanent roles.

Over the year, the number of people in permanent employment rose by 46,100 and the number of people employed on fixed-term contracts dropped by 12,400, she said.