New Zealand’s unemployment rate rose more than forecast in the fourth quarter, sending the local currency lower and reducing the case for the central bank to raise interest rates in coming months.
The jobless rate increased to 6.8 percent from 6.4 percent three months earlier, Statistics New Zealand said today. The median estimate of 10 economists surveyed by Bloomberg News was for 6.5 percent. The New Zealand dollar fell to 77.41 U.S. cents at 1:11 p.m. in Wellington from 77.76 cents before the data.
Rising unemployment, along with falling house prices, threaten to damp a projected rebound from the economy’s contraction in the third quarter. Central bank Governor Alan Bollard last month kept interest rates unchanged, saying it was prudent to keep borrowing costs low until growth strengthens.
“It has changed our thinking about the timing of the Reserve Bank’s forward path,” said Craig Ebert, senior markets economists at Bank of New Zealand Ltd. in Wellington, who shifted his prediction for a rate increase to September from June. Rising unemployment shows the economy “struggled” in the final three months of the year, Ebert added, seeing a risk of a second straight drop in gross domestic product.
House prices fell in December for the third time in four months, according to an index published by the Real Estate Institute on Jan. 18. A net 21 percent of companies surveyed last quarter by the New Zealand Institute of Economic Research said that profits declined, the Wellington-based research group reported on Jan. 11.
Bollard kept the official cash rate at 3 percent on Jan. 27. Five of 12 economists surveyed by Bloomberg last month, including Ebert, forecast a rate increase in June. Seven predicted the first move will be in the third quarter.
Gross domestic product unexpectedly shrank 0.2 percent in the third quarter. Bollard last week said he expects the economy avoided a recession by expanding in the three months through December.
New Zealand’s government has weathered the economic deterioration, with its popularity at 55 percent compared with the main opposition Labour Party at 29 percent, according to a Roy Morgan Research poll of 1,800 voters last month. Prime Minister John Key yesterday called a general election for Nov. 26, saying the campaign will be about which party has a plan for jobs and income growth.
Employment fell by 0.5 percent, or 11,000 jobs, from the third quarter, when it climbed a revised 1.1 percent, today’s report showed. Economists predicted a 0.2 percent increase. From a year earlier, employment rose 1.3 percent.
Pike River Coal Co. in December fired 130 workers after an explosion that killed 29 miners and closed the mine forced the company to appoint administrators. Auckland City, the nation’s most populous municipality, fired 650 managers and workers in November after the amalgamation of eight councils into a single authority.
The labor force participation rate dropped to the lowest in seven quarters, to 67.9 percent, from a revised 68.3 percent three months earlier. The rate fell because about 17,000 more people said they were no longer employed or looking for work. The number of people unemployed rose 8,000 to 158,000.
The results “indicate a further deterioration in the labor market,” Peter Gardiner, labor market statistics manager at Statistics New Zealand, said in a statement. “The labor market has struggled to gain momentum following the recent economic downturn.”
Full-time employment increased by 5,000 jobs, or 0.3 percent, from the third quarter. Part-time employment declined 14,000, or 2.8 percent. Statistics New Zealand adjusts the full-and part-time employment figures separately, which means they may not add up to the total change in employment.
Total actual hours worked per week rose for the fourth consecutive quarter, gaining 0.2 percent, today’s report showed.