NZ: Employment data in focus tomorrow – Westpac

According to analysts at Westpac, New Zealand’s Q3 household labour force survey and Labour Cost Index will be the key economic releases for tomorrow.

Key Quotes

“A range of indicators suggest that New Zealand’s labour market has continued to strengthen this year, even as the wider economy has entered a period of slower growth. We expect the Household Labour Force Survey to show another modest decline in the unemployment rate to 4.7%, which would be the lowest since December 2008.”

“Both employment and labour force participation are subject to quarterly volatility. This issue may have been exacerbated by a change to the survey in June 2016, which led to a one-off jump in the level of employment, but in doing so may have disrupted the seasonal pattern of the series. Our forecast of a strong rise in both employment and participation reflects payback for their unexpected declines in the June quarter.”

“Q3 Labour Cost Index

• With the labour market gradually tightening, and inflation no longer at rock-bottom levels, we expect to see a pickup in wage inflation over the next year or so. The process is likely to be a gradual one, though, as the Labour Cost Index tends to evolve slowly over time.
• However, the September quarter report is likely to see a substantial jump in labour cost inflation, due to the recent equal pay settlement for healthcare workers. (Our understanding is that this will show up in private sector wages, though it’s publicly funded.) Excluding this effect, we expect to see a modest uptick in annual labour cost growth, from 1.7% to 1.8%. In the context of this slow-moving series, this would be a five-year high.”