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N.Z. Jobless Rate Unexpectedly Rises as Workforce Swells

  • Participation rate climbs to record 70.5% in fourth quarter
  • Kiwi falls as economists expected unemployment to drop

New Zealand’s jobless rate unexpectedly rose from an eight-year low in the final quarter of 2016 as more people sought work than could find jobs. The currency fell half a U.S. cent.

Key Points

  • Jobless rate rose to 5.2% from 4.9%; economists’ median estimate was drop to 4.8%
  • Employment increased 0.8% q/q; economists expected 0.7% gain
  • Participation rate rose to record 70.5%; economists forecast 70.2%
  • New Zealand dollar falls to 72.93 cents at 11:37 a.m. in Wellington

Big Picture

While the jobless rate rose, employment grew more than economists expected, adding to signs of a tightening New Zealand labor market that could help Reserve Bank Governor Graeme Wheeler’s efforts to lift inflation back to the middle of his 1-3 percent target band. At the same time, employers are able to fill positions without big wage increases because of record numbers of immigrants seeking work.

Economist Takeaways

“Strong growth in the economy has been attracting more and more people into the labor market, and this trend has been reinforced by strong levels of migration,” said Satish Ranchhod, senior economist at Westpac Banking Corp. in Auckland. “This increase in the size of the labor force outweighed the increase in employment, resulting in the lift in unemployment.”

“The labor market is still robust despite the uplift in the headline unemployment rate,” said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland, who nevertheless expects the central bank to keep its benchmark rate at a record low of 1.75 percent through late 2018. “Wage growth was fairly benign, with little sign of growing inflation pressure, and the surprising elasticity of labor supply will keep wage-driven inflation sidelined in the near term at least.”

Other Details

  • Employment rose 5.8% y/y
  • Non-government ordinary time wages rose 0.4% q/q; economists expected 0.5%
  • Non-government ordinary time wages rose 1.6% y/y, unchanged from 3Q
  • Filled jobs rose 3.3% y/y -- most since 1Q 2015
  • Hours worked rose 1.3% q/q
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