New Zealand’s unemployment rate unexpectedly rose to the highest since 2010 as more people unsuccessfully sought work, adding to the case for the central bank to keep interest rates at a record low this year.
The jobless rate rose to 6.7 percent in the first quarter from a revised 6.4 percent in the three months through December, Statistics New Zealand said in a report today in Wellington. The rate exceeded the 6.3 percent median forecast in a Bloomberg News survey of 10 economists and was the highest since the fourth quarter of 2010.
The local dollar fell to the lowest level in more than three months after the report showed New Zealand’s unemployment rate has exceeded 6 percent for three years, signaling a sluggish economic recovery from earthquakes that devastated the southern city of Christchurch last year. Central bank Governor Alan Bollard has kept the official cash rate at 2.5 percent since March last year and signaled on April 26 that level remained appropriate amid benign inflation.
The jobless rate “is consistent with an economy that is struggling to grow above even a mediocre trend rate,” said Darren Gibbs, chief New Zealand economist at Deutsche Bank AG in Auckland. “Wage inflation seems likely to remain subdued for some time. We can’t see the the RBNZ hiking in 2012.”
Gibbs was one of at least three three economists who revised their forecast for interest-rate increases after today’s report. He previously prediced a quarter-point rise in December.
Ten of 14 economists surveyed by Bloomberg today forecast Bollard won’t raise borrowing costs this year. The likelihood of a rate cut by December rose to 74 percent from 44 percent late yesterday, according to data on interest-rate swaps compiled by Bloomberg.
New Zealand’s dollar fell to as low as 80.41 U.S. cents, the weakest since Jan. 25. It bought 80.62 U.S. cents at 3:57 p.m. in Wellington from 80.83 cents immediately before the release. The so-called kiwi has strengthened 3.8 percent this year against its U.S. counterpart, making it the third-biggest gainer among the Group of 10 currencies.
Employment increased by 0.4 percent, or 9,000 jobs, from the fourth quarter, faster than the 0.3 percent median forecast in the economists’ survey, today’s report showed. Annual job growth was 0.9 percent, the slowest in almost two years.
Bollard, who announced earlier this year he’ll step down in September, said last month the domestic economy was showing signs of recovery led by a rebound in building. Still, the global outlook is fragile while the currency remains strong, he said. In March, he said the exchange-rate gains were undermining economic growth.
New Zealand’s economy grew 1.8 percent in the fourth quarter from a year earlier. Consumer prices rose 1.6 percent in the year ended March 31, the slowest annual pace since September 2010 and less than the midpoint of the 1 percent to 3 percent range Bollard is required to target.
Full-time employment fell by 3,000 jobs, or 0.2 percent, from the fourth quarter, according to today’s report. Part-time employment rose by 13,000 jobs, or 2.5 percent, to a record. Statistics New Zealand adjusts the full- and part-time employment figures separately, which means they may not add to the total change in employment.
Air New Zealand Ltd. (AIR), the nation’s largest airline, said in February it would cut 441 jobs by June as part of a series of initiatives to improve profit.
The unemployment rate rose as more people made themselves available for work but couldn’t find jobs. The labor force participation rate jumped to 68.8 percent, the highest since a record in 2008, from 68.2 percent three months earlier. The number of people unemployed rose to 160,000.
Total actual hours worked per week rose 0.1 percent from the fourth quarter, today’s report showed.
The labor market in Christchurch and the surrounding Canterbury region is beginning to show signs of recovery, the statistics agency said. Hours worked surged 13 percent from the year-earlier quarter, when earthquakes killed 185 people in the city, today’s report showed.
Excluding the region, hours worked across New Zealand fell 1.3 percent in the quarter and 0.9 percent from a year earlier. Employment excluding Canterbury fell in the quarter, the report showed.
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