NZ: Unemployment rate likely to remain steady - Westpac

In view of analysts at Westpac, this week’s labour market figures of New Zealand are expected to show that firms are still keen to hire, but that the unemployment rate has remained steady while the financial markets are probably more vulnerable to a softer than expected outcome, given the number of factors that already point to the Reserve Bank keeping interest rates on hold for a long time.

Key Quotes

“We expect the Household Labour Force Survey (HLFS) to show a 0.7% rise in employment over the June quarter. We also expect a similar result from the employer-focused Quarterly Employment Survey (QES), with a 0.9% rise in the number of full-time equivalent employees.”

“Growth in employment is expected to be widespread, with larger gains in service sectors (including hospitality), retail and professional services. We also expect continued employment gains in the construction sector, though difficulties in sourcing skilled labour may provide some brake on jobs growth on this front.”

“However, while the demand for workers is growing, the active labour force is also growing at a strong clip. The rise in population growth in recent years, led by trends in net migration, has been strongly motivated by job prospects. New arrivals have risen sharply, particularly for those coming on temporary work visas. At the same time, more New Zealanders are returning from Australia and fewer are leaving in the first place, which reflects the relatively subdued Australian jobs market in recent years.”

“As a result, we expect the unemployment rate to remain unchanged at 4.9%. That’s a marked improvement on the post-financial crisis peak of 6.7%, but it’s not particularly low compared to history. The unemployment rate was consistently below 5% from 2003 to 2008, and it wasn’t until it fell below 4% that the labour market tightened and wage growth really ramped up.”