By Bernard Hickey
Statistics NZ has reported the unemployment rate fell to 6.2% in the September quarter from 6.4% in the June quarter, which was a touch better than the consensus economist forecast for a fall to 6.3%.
Seasonally adjusted employment growth of 27,000 or 1.2% for the quarter was also much better than the consensus forecast of growth of around 0.5%.
The only reason unemployment did not fall further was a rise in the participation rate to 68.6% from 68.1% in the June quarter.
The unemployment rate has fallen from 7.2% over the last year.
The number of unemployed fell 4,000 to 150,000 in the quarter, with female unemployment the biggest faller (down 4,000). Unemployment has fallen 23,000 over the year.
The New Zealand dollar immediately jumped 30 basis points to 83.6 USc after the jobs figures, which are seen increasing the pressure on the Reserve Bank to lift the Official Cash Rate to control inflation pressures earlier and more than expected before the figures.
Two year wholesale interest rates, which are the basis for fixed mortgage rates, rose 4 basis points.
However, Statistics NZ also reported wage growth being restrained. Annual wage inflation, as measured by the labour cost index (LCI) salary and ordinary time wage rates, fell to 1.6% in the September quarter from 1.9% in the same quarter a year ago.
"Subdued wage inflation follows a period of higher unemployment during 2012 and coincides with low consumer price inflation," Industry and Labour Statistics Manager Diane Ramsay said.
The Household Labour Force Survey showed the main contributors to the 2.4% or 54,000 growth over the year in employment were rises in the retail trade, and accommodation and food services industry group (up 25,200 people – 7.6 percent) and in the construction industry (up 11,200 people – 6.7 percent).
"These increases were partly offset by a decline in the agriculture, forestry, and fishing industry group. Employment in this industry group reached its lowest level since September 2009, down 18,300 (12.0 percent) to 138,700 people. However, this fall was exaggerated by an unusually large rise in employment in this industry in the September 2012 quarter," Statistics NZ said.
Full time jobs rose 17,000 or 1% over the quarter, while part time jobs rose just slightly and are still below where they were a year ago. The NEET (Not in employment, education or training) for 15-24 year olds fell 0.7% to 11.4% in the September quarter, its lowest rate since the December 2008 quarter.
Auckland, Canterbury wins
Auckland employment grew 55,000 in the year to the September, meaning in net terms all of New Zealand's jobs growth in the last year has been in Auckland. Canterbury employment rose 6,500 during the year, while unemployment there fell 3,200.
"The increase in Canterbury employment included a 9,900 rise in the retail trade, and accommodation and food services industry group and a 4,200 rise in the construction industry," Statistics NZ said, noting however this was partly offset by a 6,700 fall in employment in the agriculture, forestry, and fishing industry group.
Excluding Auckland and Canterbury, employment in the rest of New Zealand fell over the year to the September quarter.
Flat wage growth
Statistics NZ's Labour Cost Index survey showed salary and ordinary time earnings rose 1.6% in the September quarter from a year ago, falling from a 1.7% annual rate in the June quarter. Overtime wage rates rose 2.2% from a year ago, unchanged from the June quarter.
Just 54% of the salaries and ordinary time wages in the sample rose during the year. The median wage increase was 2.5%, the lowest since the December quarter of 2000. The mean annual increase of 3.3% was the lowest since the September 2000 quarter.
Canterbury construction industry wages rose 3.7% for the year, while construction wages in the rest of the country fell to 1.6% from 2.1% in the June quarter.
Economist reaction
Westpac Economist Dominick Stephens said the employment growth showed surprising momentum, but the Reserve Bank would take the numbers in its stride and still hike the OCR in April, as Westpac is forecasting. Wage growth remained contained and there were few signs of construction sector inflation spilling over into the rest of New Zealand, Stephens said, pointing to construction sector wage inflation outside Canterbury of just 1.6%.
"The lagged effects of spare capacity and low overall inflation continue to weigh on wage growth," he said.
ASB Economist Jane Turner said the jobs growth in the retail, food and beverage sector was consistent with a broader pick-up in consumer confidence and spending, while the subdued wage growth of 0.4% over the quarter reflected the lagged effect of weak consumer price inflation "as many wage increases are tied to past CPI movements."
"We are seeing the underlying conditions in the labour market tighten and over time this will feed into stronger wage inflation pressures," Turner said.
She said the survey may understate the strength of employment demand in Canterbury, and therefore the overall market.
"The RBNZ may be wary of the weakness in wage inflation. However, given the recent lift in CPI, the RBNZ can be confident inflation pressures have turned," she said, adding ASB was sticking with its forecast for the first OCR hike being in March next year.
(Updated with more detail, economist reaction, market reaction, chart below)
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