New Zealand Jobless Rate Falls to 14-Year Low, Hiring Surges

Matthew Brockett
·3 min read

(Bloomberg) -- New Zealand’s unemployment rate fell to its lowest level in almost 14 years in the third quarter as employment surged, sending the currency higher as traders boosted bets on interest-rate increases.

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The jobless rate dropped to 3.4% from 4% in the second quarter, the lowest rate since the fourth quarter of 2007 and matching the lowest on record, Statistics New Zealand data showed Wednesday in Wellington. Economists expected 3.9%. Employment jumped 2% from the previous three months versus expectations of a 0.4% gain.

Workers are in demand as New Zealand’s closed border cuts the supply of imported labor, boosting wages and adding to inflation pressures that have already prompted the central bank to begin raising interest rates. That’s despite a Covid-19 outbreak in Auckland keeping the country’s largest city in lockdown since mid-August, denting economic growth.

‘RBNZ Concerns’

“There appears to be little impact on labor demand from the Covid-19 community outbreak and lockdown over the second half of the quarter,” said Jane Turner, senior economist at ASB Bank in Auckland. Today’s data “will reinforce RBNZ concerns that the current inflation spike will have lasting impacts on wage and price-setting behaviors,” she said.

The kiwi dollar climbed after the report. It bought 71.30 U.S. cents at 11:51 a.m. in Wellington, up from 71.08 cents immediately before the release. Investors now see a 40% chance that the Reserve Bank will deliver a 50 basis-point rate hike at its next meeting on Nov. 24, swaps data show.

Strong inflation around the globe is putting pressure on central bankers to rethink policy timelines as they move from supporting pandemic-hit economies to containing prices. The RBNZ last month raised its official cash rate by 25 basis points to 0.5% and signaled more tightening to come.

Today’s labor market report “should encourage the RBNZ to hike rates more aggressively,” said Ben Udy, an economist at Capital Economics.

Inflation surged to an annual rate of 4.9% in the third quarter, the fastest pace in 10 years and well above the 1-3% band targeted by the RBNZ.

Hiring Surge

Employment has risen for four straight quarters. The 2% quarterly gain and the 4.2% increase in the year were both the largest in five years. Economists had forecast 2.7% annual growth.

The participation rate climbed to 71.2% from 70.5% in the three months through June.

Statistics New Zealand said the underutilization rate, which is a broader gauge that includes employed persons seeking additional hours, fell to 9.2% from 10.5% in the second quarter.

Ordinary time wages for non-government workers rose 0.7% in the quarter, the statistics agency said. From a year earlier, wage growth picked up to 2.5% from 2.2% in the 12 months through June.

(Adds more details from report, comment from economist.)

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