- Data reinforce expectation of December RBNZ Rate Cut: ASB
- New Zealand dollar weakens half a U.S. cent after report
New Zealand employment unexpectedly fell for the first time in three years in the third quarter, pushing up the nation’s jobless rate and sending the currency lower.
Employment dropped 0.4 percent from the second quarter and the unemployment rate rose to 6 percent from 5.9 percent, Statistics New Zealand said Wednesday in Wellington. Economists had forecast a 0.4 percent increase in employment, according to the median estimate in a Bloomberg News survey.
Economic growth has weakened after a plunge in dairy prices curbed farm incomes and dented business confidence, while record immigration is keeping a lid on wages. Reserve Bank Governor Graeme Wheeler last week kept the official cash rate at 2.75 percent after three reductions, but said further easing is likely to be required to return inflation to his 2 percent target midpoint next year.
Today’s data “reinforce our view that the RBNZ should cut the OCR again in December,” said Nick Tuffley, chief economist at ASB Bank in Auckland. “And the risk is the OCR gets cut even lower over 2016.”
The New Zealand dollar fell half a U.S. cent after the release and bought 66.62 cents at 1 p.m. in Wellington.
- Employment fell 11,000 in 3Q
- Working-age population increased 22,000 in 3Q
- Participation rate fell to 68.6% in 3Q from 69.3% in 2Q
- Employment rose 1.5% from year earlier vs. median forecast of 2.5% gain
“This is the second consecutive quarter that employment growth has not kept up with growth in the working-age population,” the statistics agency said.
Part-time employment fell 4.1 percent in the third quarter from the second, while full-time employment rose 0.2 percent, today’s report showed.
“The latest survey evidence suggests that employment growth will remain weak in the fourth quarter,” said Paul Dales, chief Australia and New Zealand economist at Capital Economics in Sydney, who expects New Zealand unemployment to approach 6.5 percent next year. “The RBNZ is going to have to conclude at its December meeting that the labor market is weaker than it thought.”
Record immigration is making it easier for employers to fill positions without raising wages, with annual net immigration rising to 61,200 in September. Wages for non-government workers excluding overtime rose 0.4 percent from the second quarter, less than a 0.5 percent increase seen by economists.