Expected big jump in unemployment fails to materialise with rise to only 4%

Wednesday, 7 February 2024

Pay rises in the pubic sector have been the highest since 2006.

The official unemployment rate inched up to 4% in the December quarter, climbing only a little from 3.9% the previous quarter and undershooting all mainstream forecasts.

ANZ, ASB and BNZ had expected Stats NZ would report that the official unemployment rate had risen much further, to 4.3%, while Westpac, the Reserve Bank, and Kiwibank had predicted a rise to 4.2%.

The far smaller rise in unemployment reported by Stats NZ could keep the possibility of a rise in the official cash rate to 5.75% later this month in play.

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.

Neither ANZ nor BNZ were ruling out a further rate rise last week, even ahead of the surprisingly resilient employment data.

The unemployment rate among males fell to 3.7% from 3.8% previously, while it rose for females, to 4.3% from 4.1%, Stats NZ reported.

It reported a small rise in the labour under-utilisation rate, which is a broader measure of unemployment and under-employment, to 10.7%, from 10.4% in the previous quarter.

People who have part-time work but who want work full-time employment are among those who would be counted in that figure.

The Reserve Bank may find some solace from the fact that private sector wage rises are continuing to trend down in a roughly straight line, according to Stats NZ’s latest data.

Annual growth in ordinary-time hourly earnings in the private sector was 6.6% last year, down from the recent peak of 8.6% in the year to the September 2022 quarter, Stats NZ reported.

But it also reported that average ordinary-time hourly earnings in the public sector rose 7.4% over the year to the December quarter, which was the largest increase it recorded since March 2006.

The big jump in public sector pay came despite clear signals that the coalition Government would be seeking large savings from the sector.

When overtime pay was included, average hourly earnings for workers in the public and private sectors combined were 6.8% higher in the December quarter than a year prior, far outpacing the 4.7% inlfaton rate for the same period.