New Zealand’s unemployment rate unexpectedly rose to a two-year high last quarter, adding to evidence of a weak economic recovery. The local currency retreated and investors increased bets on an interest-rate cut.
The jobless rate gained to 6.8 percent from 6.7 percent in the first quarter, Statistics New Zealand said in a report today in Wellington. The median estimate in a Bloomberg survey was 6.5 percent. Employment dropped by 0.1 percent, or 2,000 jobs, from the first quarter, when it increased 0.4 percent. Economists expected a 0.4 percent advance in second-quarter employment.
New Zealand’s dollar fell as the hiring stall bolsters the case for the central bank to hold the official cash rate at a record-low 2.5 percent to help lift confidence hurt by earthquakes in the past two years. Prime Minister John Key this week said he expected companies and private investors to aid economic growth while the government curbs its own spending to help return to a budget surplus.
“This was a genuinely weak labor market report and will serve as further confirmation that the economy is operating well below capacity,” Felix Delbruck, senior economist at Westpac Banking Corp. in Auckland, said in a note. “The Reserve Bank will feel even more comfortable with its plan to leave the cash rate at its current level for a long while.”
The local dollar fell as low as 81.11 U.S. cents from 81.59 cents immediately before the release. The so-called kiwi bought 81.28 cents at 1 p.m. in Wellington and has increased 4.6 percent this year, the best performer among the Group of 10 currencies tracked by Bloomberg.
From a year earlier, employment increased by 0.6 percent or 13,000 jobs, the smallest annual gain in two years, today’s report showed. The jobless rate rose to its highest since the second quarter of 2010.
Central bank Governor Alan Bollard has kept borrowing costs at a record low since March last year and signaled on July 26 that level remained appropriate amid benign inflation.
Bollard last month said he expected the economy to grow modestly, led by housing demand and reconstruction in Christchurch and the surrounding Canterbury province. Still, the outlook for the economies of New Zealand’s trading partners remains poor, he said.
All 16 economists surveyed by Bloomberg last month forecast he won’t raise borrowing costs this year. The chance of a rate cut before January rose to 46 percent from 29 percent yesterday, according to interest rate swaps data compiled by Bloomberg.
New Zealand’s economy grew 2.4 percent in the first quarter from a year earlier. Consumer prices rose 1 percent in the year ended June 30, the slowest annual pace since 1999 and at the bottom of the 1 percent to 3 percent range Bollard is required to target.
Consumer confidence rose to a seven-month high in August, according to an index from ANZ National Bank Ltd. today. House prices advanced 4.6 percent in July from a year earlier, according to a report from Quotable Value New Zealand.
Business confidence stayed near a 15-month low last month, ANZ National said in a report on July 31, citing a survey of 389 firms. Companies including Telecom Corp., the nation’s largest fixed-line telephone company, and national airline Air New Zealand Ltd. have been firing workers to reduce costs and arrest a slide in profits.
Carpet manufacturer Cavalier Corp. last month closed a yarn-spinning plant, firing 70 workers.
Full-time employment rose by 13,000 jobs, or 0.8 percent, from the first quarter, according to today’s report. Part-time employment slumped by 18,000 jobs, or 3.4 percent. Statistics New Zealand adjusts the full- and part-time employment figures separately, which means they may not add to the total change in employment.
The unemployment rate rose as the working age population increased and those extra people didn’t make themselves available for work. The labor force participation rate declined to 68.4 percent from a revised 68.7 percent three months earlier. The number of people unemployed rose to 162,000.
Total actual hours worked per week rose 0.5 percent from the first quarter, today’s report showed.
The labor market is being distorted by Canterbury, the statistics agency said. Employment in the region fell 5.5 percent from the year-earlier quarter. Excluding Canterbury, annual employment growth was 1.6 percent, it said.
In the year-earlier period, Christchurch was in the immediate aftermath of a deadly temblor that struck on Feb. 22, 2011, with many people on leave or receiving special payments even as their workplaces were closed.
Hours worked in Canterbury fell 5.8 percent from the year-earlier quarter. Excluding the region, hours worked across New Zealand rose 0.6 percent from a year earlier, the report showed.