WELLINGTON: New Zealand’s jobless rate rose to a four-year high at the end of last year as hiring fell in the wake of a sharp recession.
Unemployment climbed to 5.1% in the fourth quarter from 4.8% in the third, Statistics New Zealand said yesterday. Economists expected 5.1%.
Employment dropped 0.1% from the previous three months, less than estimates of a 0.2% decline, while annual wage inflation slowed for a seventh straight quarter.
New Zealand’s economy contracted 2.1% in the six months through September, denting business confidence.
The weakening labour market gives the Reserve Bank of New Zealand (RBNZ) scope to continue cutting interest rates, which is expected to drive a modest economic recovery this year.
“The labour market is expected to continue to soften given a subdued outlook for economic activity and likely cost cutting by firms struggling to rebuild battered profitability,” said Mark Smith, senior economist at ASB Bank in Auckland.
“A front-loaded pace of policy easing remains appropriate for now.”
The RBNZ has lowered the official cash rate (OCR) by 125 basis points since it began an easing cycle in August.
Policymakers have signalled they will deliver a third straight 50-point cut at their next decision on Feb 19, which would take the OCR to 3.75%.
The unemployment rate is the highest since the third quarter of 2020. The RBNZ in November forecast 5.1%.
Employment fell 1.1% from a year earlier, the biggest annual decline since 2009, while the participation rate eased to 71% from 71.1%.
New Zealand’s annual inflation rate held steady in the fourth quarter at 2.2%, near the midpoint of the central bank’s 1% to 3% target band.
Softening wage pressures should continue to slow overall inflation.
Ordinary time wages for non-government workers rose 2.9% from a year earlier, slowing from 3.4% pace in the previous quarter, the statistics agency said.
Average ordinary time hourly earnings for non-government workers gained 1.3% from the previous quarter and 4% from a year earlier. That’s down from a record 8.6% annual reading in the third quarter of 2022. — Bloomberg
