New Zealand Employment Gains as Case for 2014 Rate Rise Builds
New Zealand employers added workers at a faster pace than economists expected in the three months through June and more people sought work, adding to the case for an interest-rate increase early next year.
Employment rose 0.4 percent, or 8,000 jobs, from the first quarter when it surged a record 1.7 percent, Statistics New Zealand said in a report today in Wellington. The median forecast in a Bloomberg News survey of 12 economists was for a 0.3 percent gain. The jobless rate rose to 6.4 percent from 6.2 percent, and was higher than the 6.3 percent seen by economists, as the participation rate climbed to 68 percent.
Jobs growth and rising business confidence suggest pressure may build on wages and inflation in coming quarter, adding to signs that Governor Graeme Wheeler may start raising interest rates from a record-low 2.5 percent early next year. Last month, he signaled that borrowing costs will need to increase, while adding that he didn’t expect to move this year because inflation remains benign.
“New Zealand’s economic upswing is now well entrenched,” Felix Delbruck, senior economist at Westpac Banking Corp. (WBC) in Auckland, said in an e-mailed note earlier this week. “The consequences for domestic inflation pressures are less certain.”
The kiwi dollar was little changed after the report. It bought 79.11 U.S. cents at 11:12 a.m. in Wellington.
Wheeler has resisted rate increases this year to tackle what he has described as an overheated housing market, citing low inflation and the risk that the currency will gain, hurting exports. On July 25 he said “removal of monetary stimulus will likely be needed in the future” while adding that the central bank expects “to keep the cash rate unchanged through the end of the year.”
House prices rose 7.6 percent in June from a year earlier, the fastest pace since February 2008, according to Quotable Value New Zealand, a government-owned property research company. Business confidence gained in July to the highest since April 1999, ANZ Bank New Zealand Ltd. said last month.
There is a 43 percent chance of a rate rise by December, according to interest-rate swaps data compiled by Bloomberg. The odds of a March increase sat at 88 percent early today.
The labor force participation rate rose to 68 percent from 67.9 percent in the first quarter. Economists forecast 67.9 percent. More people were seeking work but unable to find it, leading to a slight rise in the jobless rate, officials told reporters in Wellington.
Non-government ordinary time wages rose 0.4 percent from the first quarter, less than the 0.5 percent pace in a Bloomberg survey of 10 economists, the statistics agency said in the Labor Cost Index report also released today. From a year earlier, wages rose 1.7 percent, the slowest annual pace since the third quarter of 2010.
Employment (NZLFQOQ) rose 0.7 percent from the year-earlier quarter, matching economists’ expectations. Jobs growth was led by manufacturing, professional services and retailing, the report showed, without adjusting for seasonal patterns.
The economy is also being underpinned by a NZ$40 billion ($32 billion) rebuild of earthquake-damaged Christchurch and the surrounding Canterbury region, where companies are hiring to assist with the rebuild of homes, roads and commercial buildings damaged in quakes in 2010-11.
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