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New Zealand Jobs Growth Slows Less Than Expected

Updated on
  • Fourth-quarter unemployment rate drops to a nine-year low
  • Benign wage inflation adds to signs RBNZ will stay on hold

New Zealand employment growth slowed less than economists projected in the final quarter of 2017, when a change of government caused a slump in business confidence and made firms more cautious about hiring. The jobless rate unexpectedly fell to a fresh nine-year low.

Key Points

  • Employment rose 0.5% q/q; economists expected 0.4% gain
  • Jobless rate fell to 4.5%; economists’ tipped rise to 4.7%
  • Jobless rate lowest since 4.4% in 4q 2008
  • Participation rate dropped to 71%, matching economists’ forecast
  • N.Z. dollar climbed to 73.43 U.S. cents at 11:20 a.m. in Wellington from 73.06 cents before the report

Big Picture

Business confidence and hiring intentions dropped after the Labour-led government took office in October pledging to raise the minimum wage and change environment and industrial relations policies. The lull in employment growth, which slowed from 2.2 percent in the third quarter, adds to signs that pressure on wages and inflation will remain benign, allowing the central bank to keep interest rates at a record low.

Economist Takeaways

“The tight labor market keeps the bias tilted towards a higher OCR, but the contained backdrop for wage inflation suggests no immediate need for the RBNZ to deviate from its on-hold stance,” said Nick Tuffley, chief economist at ASB Bank in Auckland. “The RBNZ will be closely following developments in wage inflation for guidance on future OCR moves.”

“The labor market is strong, but is perhaps beginning to slow under its own capacity-constrained weight,” said Phil Borkin, senior economist at ANZ Bank New Zealand in Auckland. “But signs of a sustained lift in wage pressure remain tentative at best. Some wage measures are off their lows, but are hardly lifting in a way that would suggest broader inflation pressures are about to be unleashed.”

Other Details

  • Employment rose 3.7% y/y; economists expected 3.6%
  • Employment rate unchanged at 67.8%
  • Filled jobs increased 0.3% q/q
  • Non-government ordinary time wages rose 0.4% q/q; economists expected 0.5%
  • Non-government wages rose 1.9% y/y
(Updates with economist comments.)
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