WELLINGTON: New Zealand’s jobless rate rose less than forecast in the third quarter as fewer people sought work in a sluggish economy.
Unemployment climbed to 4.8% from 4.6% in the second quarter, Statistics New Zealand said yesterday in Wellington. Economists expected 5%.
Employment fell 0.5% from the previous three months, more than estimates of a 0.4% decline, while annual wage inflation slowed for a sixth straight quarter.
New Zealand’s economy contracted in the second quarter and is projected to have shrunk further in the three months through September, putting it back in recession.
A loosening labour market gives the Reserve Bank of New Zealand (RBNZ) scope to continue cutting interest rates as it pivots from taming inflation to reviving growth.
The data “were a mixed bag in terms of market and RBNZ expectations but showed that the protracted activity downturn is now catching up with the labour market”, said Mark Smith, senior economist at ASB Bank in Auckland.
“Labour cost increases were weaker than expected and should soften further heading into 2025.”
The RBNZ has lowered the official cash rate (OCR) by 75 basis points since it began an easing cycle in August. Most economists expect a second straight 50-point cut at the final policy decision of the year on Nov 27, which would take the OCR to 4.25%.
While the RBNZ in August forecast unemployment would rise to 5% in the third quarter, the 4.8% rate is still the highest since the fourth quarter of 2020.
The forecast miss was “entirely due to a sharper than expected fall in the labour force participation rate,” said Michael Gordon, senior economist at Westpac in Auckland.
The participation rate dropped to 71.2% from 71.7% while employment fell 0.4% from a year earlier, the biggest annual decline since 2010.
“The bottom line is still that employers are shedding workers and wage pressures are easing accordingly,” Gordon said.
“That’s consistent with the view that inflation pressures are being reined in and that monetary policy no longer needs to be as restrictive.”
New Zealand’s annual inflation rate fell sharply in the third quarter – to 2.2% from 3.3% – returning to the central bank’s 1% to 3% target band for the first time in more than three years. Softening wage pressures should continue to slow overall inflation.
Ordinary time wages for non-government workers rose 3.4% from a year earlier, slowing from a 3.6% pace in the previous quarter, the statistics agency said.
Average ordinary time hourly earnings for non-government workers gained 1.2% from the previous quarter and 3.2% from a year earlier.
That’s down from a record 8.6% annual reading in the third quarter of 2022. — Bloomberg
