New Zealand Jobless Rate Unexpectedly Fell in First Quarter

(Bloomberg) -- New Zealand’s unemployment rate unexpectedly fell in the first quarter as the economy’s recovery boosted business confidence and hiring.

The jobless rate fell to 4.7% from 4.9% in the fourth quarter, Statistics New Zealand said Wednesday in Wellington. Economists expected 4.9%. Employment rose 0.6% from the previous three months, twice the 0.3% median forecast.

New Zealand business confidence rebounded in late 2020 after a V-shaped economic recovery, encouraging firms to hire more workers. While the jobless rate never hit the highs feared when the Covid-19 pandemic first hit, it is well short of the 4% level attained in 2019. This adds to signs that the Reserve Bank will want to keep providing stimulus to the economy for some time.

“The labor market still has some way to go, with the rate of unemployment still above pre-pandemic levels and the underutilization rate also elevated,” said Jane Turner, senior economist at ASB Bank in Auckland. “It remains appropriate for the RBNZ to keep monetary conditions stimulatory until the global pandemic is brought under control and New Zealand can reopen its border.”

The kiwi dollar gained after the report. It bought 71.62 U.S. cents at 11:59 a.m. in Wellington from 71.50 cents immediately before the release.

In February, the RBNZ projected the jobless rate would remain above 5% through 2021 amid signs the economic recovery was stalling. It updates its projections on May 26 and will take into account the rollout of Covid-19 vaccinations and opening of the nation’s border to Australia in its view.

Finance Minister Grant Robertson welcomed the improvement in the labor market, saying the vaccination program and re-opening of the border “provides confidence, particularly to those working in firms and sectors such as tourism that have felt the effects of the pandemic more than most.”

Seeking Full Employment

The RBNZ, which is required to support maximum employment as well as stable inflation, has said it will require considerable time and patience to deliver those objectives. While a few economists see scope for higher rates in 2022, the consensus is the official cash rate will stay at a record low 0.25% until 2023.

Peter Harris, an external member of the RBNZ Monetary Policy Committee, told Bloomberg last month that unemployment at 4.9% remained “relatively high” and the committee’s latest assessment was that employment is still below its maximum sustainable level. He said the RBNZ uses a suite of measures to assess the labor market including skill shortages and underemployment gauges.

Statistics New Zealand said the underutilization rate, which is a broader gauge that includes employed persons seeking additional hours, rose to 12.2% from 11.8% in the fourth quarter.

Ordinary time wages for non-government workers rose 0.4% in the quarter, the statistics agency said. From a year earlier, wage growth picked up to 1.6% from 1.5% in the 12 months through December.

New Zealand employment rose for a second straight quarter after slumping in mid-2020, and also gained 0.3% from a year earlier. Economists had forecast an annual decline.

The participation rate increased to 70.4% from 70.2% in the three months through December. Economists projected 70.3%.

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