New Zealand Jobs Growth Adds to Case for RBNZ Rate Rise
New Zealand employers hired workers at more than double the pace economists forecast in the three months through September, adding to the case for an interest-rate increase early next year. The kiwi rose.
Employment increased 1.2 percent, or by 27,000 jobs, from the second quarter, the most since early 2007, Statistics New Zealand said in a report today in Wellington. The median forecast in a Bloomberg News survey of seven economists was for a 0.5 percent gain. The jobless rate fell to 6.2 percent from 6.4 percent, matching economists’ median forecast.
Faster jobs growth and rising business confidence suggest pressure will build on wages and inflation in coming quarters, adding to signs Reserve Bank of New Zealand Governor Graeme Wheeler may start raising rates from a record-low 2.5 percent as early as March. Last month, he signaled that borrowing costs will need to increase in 2014 as domestic demand picks up and inflation accelerates.
“The strengthening economy is starting to flow through into the demand for labor,” Mark Smith, senior economist at ANZ Bank New Zealand Ltd. in Wellington, said in an e-mailed note. “Pressures on capacity will eventually flow through into generalized wage inflation and rate increases, but this remains an early 2014 story.”
The kiwi dollar rose after the report. It bought 83.61 U.S. cents at 3:45 p.m. in Wellington, from 83.29 cents before the data were released.
Wheeler has resisted rate increases this year to tackle what he has described as an overheated housing market, citing low inflation and the risk the currency will gain, hurting exports. Twelve of 15 economists surveyed last month expected a rate rise in March, although two now expect a second-quarter move, citing recent currency gains.
The odds of a rate rise by March increased to 67 percent from 51 percent late yesterday, according to interest rate swaps data compiled by Bloomberg.
House prices rose 8.4 percent in September from a year earlier, near the fastest pace since early 2008, according to QuotableValue New Zealand, a government-owned property research company. Business confidence in October remained near a 14-year high, ANZ Bank New Zealand Ltd. said last month.
The labor force participation rate climbed to 68.6 percent from a revised 68.1 percent in the second quarter. Economists forecast 68 percent. More people were seeking work and successfully finding jobs, leading to the highest participation since early 2012, the statistics office said.
Elsewhere, Australia’s trade deficit narrowed more than expected in September as imports declined. Indonesia’s economy probably expanded 3.01 percent in the third quarter from the previous three months, according to economists surveyed by Bloomberg.
In Japan, minutes released today by the central bank from an Oct. 3-4 meeting showed some board members’ view that consumer-price increases may “pause” in coming months, a development that could undermine confidence in Prime Minister Shinzo Abe’s efforts to pull the nation out of deflation.
Later, reports will show U.K. industrial production rose in September after unexpectedly slumping the most in almost a year in August, while euro zone retail sales fell for the first time in three months in September, economists predicted. The Conference Board index of U.S. leading indicators probably rose at a slower pace in September, according to an economists’ survey.
Employment in New Zealand rose 2.4 percent from the year-earlier quarter, the fastest pace since 2007. Economists forecast 1.6 percent. Jobs growth was led by retailing, accommodation and construction, the report showed, without adjusting for seasonal patterns. Employment (NZLFQOQ) in Auckland, home to a quarter of the nation’s 4.5 million people, jumped 8 percent from a year earlier.
Non-government ordinary time wages rose 0.4 percent from the second quarter, the statistics agency said in the Labor Cost Index report also released today. From a year earlier, wages rose 1.6 percent, the slowest pace in three years.
Wages in Canterbury increased 0.9 percent amid a shortage of construction workers, today’s report showed. The economy is 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 construction of homes, roads and commercial buildings damaged in quakes in 2010-11.
Wages in the rest of New Zealand gained 0.2 percent. Construction industry wages in Canterbury rose 1 percent and were little changed in the remainder of the country.
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