Tough times: A morning commuter on Ponsonby Road in Auckland. New Zealand’s economy may be headed for a hard landing after business confidence slumped in the first quarter. - Bloomberg
WELLINGTON: New Zealand’s jobless rate rose to a three-year high in the first quarter and employment unexpectedly fell as high interest rates cooled demand and curbed hiring.
Unemployment climbed to 4.3% from 4% in the fourth quarter, the highest since the first quarter of 2021, according to Statistics New Zealand.
Economists expected 4.2%. Employment fell 0.2% from the previous three months, missing estimates of a 0.3% increase, while wage inflation slowed for a fourth straight quarter.
The loosening labour market will be welcomed by the Reserve Bank of New Zealand (RBNZ) as it battles to return inflation to its 1% to 3% target band.
While the economy entered recession in the second half of last year, domestic price pressures have remained more persistent than policymakers would like.
“The Kiwi economy has been through a significant recession. Four of the last five quarters have recorded a contraction,” said Jarrod Kerr, chief economist at Kiwibank in Auckland.
“The labour market lags the economy by about nine to 12 months. So there’s still another year of softness ahead.”
The New Zealand dollar dipped after the report. It bought 58.77 US cents in Wellington from 58.86 US cents beforehand.
Last month the RBNZ held its official cash rate (OCR) at 5.5% and said it expected to keep monetary policy restrictive for a sustained period. Investors are betting on a fourth quarter rate cut and most economists concur, although some expect the OCR to remain unchanged until 2025.
“Labour cost growth only slowly receded and is stronger than would be consistent with sub-3% inflation,” said Nathaniel Keall, an economist at ASB Bank in Auckland.
“The inherent stickiness of labour costs and core inflation will be of concern to the RBNZ.”
Ordinary time wages for non-government workers rose 3.8% from a year earlier, slowing from 3.9% pace in the previous quarter, the statistics agency said. — Bloomberg
