Well, it's real low - but it is not as low as it was expected to be.
Statistics New Zealand reports that the unemployment rate as at the end of the March quarter was 3.2%, which is the same as it was in December.
Economists had expected a continued fall in the rate, with predictions it may get down to 3%. However, the view after the figures were released was that the Omicron outbreak may have thrown figures around a little.
The big story is wage rises - and the figures show these are really starting to get some traction. Obviously the fear is that this could start a wage and price rise spiral.
Stats NZ says the cost of labour rose 3.1% over the course of the year, which is up from 2.8% in December. Average hourly wages rose 4.8%, while average private sector hourly wages rose 5.3%.
ANZ economist Finn Robinson and chief economist Sharon Zollner said wage growth "has increased markedly", with productivity-adjusted private sector labour costs up 3.1% y/y (2.8% previously), unadjusted labour costs up 5.0% (4.5% previously), and average hourly earnings lifting 5.3% y/y (4.1% previously).
"All three wage growth figures are clearly still far behind Q1’s 6.9% CPI inflation print – but are accelerating faster than we expected," they said.
"For the RBNZ [Reserve Bank], which had pencilled in a 3.1% lift in private sector labour costs in the February MPS [Monetary Policy Statement], this data will confirm that the labour market will be a key driver of domestic inflation pressures over 2022.
"This will require ongoing interest rate hikes to bring labour demand back in line with labour supply and nip a potential wage-price spiral in the bud. That’s consistent with our expectation for a 50bp hike in [the Official Cash Rate in] May."
They say that should the tightening Australian labour market lure a significant number of Kiwis overseas (a serious risk), then the labour market may tighten even further.
"This is a highly inflationary process, given that productivity is not rising as quickly as wages. That means firms will have to pass on higher wages in the prices they charge – potentially generating an ongoing cycle of higher wages and higher prices.
"In turn, that would mean any benefit workers may expect from a tight labour market is simply eaten away by inflation.
"So the RBNZ needs to get ahead of this pernicious cycle by continuing to quickly raise the OCR (including a second 50bp hike in May). It won’t be fun, and highly indebted households could struggle. But letting domestic inflation spiral would have far worse consequences."
Stats NZ's work and wellbeing statistics senior manager Becky Collett said the unemployment rate remains one of the lowest recorded since Stats NZ's Household Labour Force Survey series began in 1986.
In the March 2022 quarter, the:
- unemployment rate remained at 3.2%
- underutilisation rate was 9.3%
- employment rate fell to 68.6%
- average ordinary time hourly earnings rose to $36.18, up from $35.61 in the previous quarter.
The seasonally adjusted labour force participation rate was 70.9%, down slightly from 71.1% last quarter.
- For men, the labour force participation rate remained flat at 75.6% compared with last quarter.
- For women, the labour force participation rate was 66.4 percent, down slightly from 66.6% last quarter.
“Wage inflation is at its highest level since the March 2009 quarter,” Stats NZ's business prices delivery manager Bryan Downes said.
Wage inflation is the percentage change for all salary and wage rates (including overtime) in the adjusted Labour Cost Index, which measures changes in the cost of labour incurred by businesses, adjusting for changes in the quality, quantity, and type of work.
The unadjusted LCI, which includes price changes attributed to changes in the quality or type of work done, rose 4.8% in the year to the March 2022 quarter.
In the same period, average ordinary time hourly earnings, measured by the Quarterly Employment Survey (QES), rose 4.8% to reach $36.18. This figure is the mean value of wages and salaries paid per hour excluding overtime in jobs measured by the QES, so it can rise or fall as the type of work being done changes.
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25 Comments
As minimum wage went up 6 % annually, and wages rose 3.2 % on average ,who took a decrease to balance off that 6 % minimum wage increase, or did all other wage and salary earners get more or less nothing( but -7% after inflation took a bite out of take home pay? ) These aggregated numbers need more detailed explanation.
This has been an ongoing trend in our labour market: the gap between minimum and median wage levels in NZ have been rapidly closing since Labour took office in 2017. Median wages have risen 10% since 2018, while minimum wages have clocked growth at twice that rate (21.21%).
No public study has bothered to look into these developments to generate detailed explanations because it does not matter. Successive governments have focused their efforts solely on "job creation" and low unemployment without so much a thought given to the quality and wage potential of these jobs.
This could also lead to a brain drain.
People who have the skills and potential to earn higher wages - head offshore to those countries that will pay them as these skills and potential becomes increasingly undervalued. ( The concept that everybody should earn the same is why pure socialism fails - those who offer more either in skills, effort or knowledge or take on more risk will have the expectation that they will earn more)
Perfect example of this is in the medical industry where NZ's top pay rate for a doctor in a DHB is the equivalent to the entry level pay for a doctor in the Australian system. Good doctors will move countries to take advantage of the higher paying roles
Govt is refusing to allow the latest Senior Medical Doctor contract to be finalised (it gets renegotiated every few years but has been stalled for over 12 months by govt who actually endorsed that doctors had to endure ‘a year of pain’ before further discussion). They don’t want to pay doctors their market rate. Doctors are getting the AHPRA registration and heading over Tasman. NZMC is updating its guidelines to allow doctors from overseas not previously allowed to register and work here (think Eastern Europe and India) to cover shortages. Will be a bleak winter in your local hospital this year for all involved.
Ultimately because most money has been encouraged into untaxed speculation and we're only taxing productive work, we don't have the tax base to pay critical workers in health, police, teaching etc. what is needed. So our services suffer because of speculator entitlement mentality prevalent in too much of society and government.
Of course it isn't purely. But if we encourage low productivity over high productivity and dim wittedness over intelligence, will that make us a better economy and country?
Has any country ever become richer by stupifying it's population? Of course not! In fact the opposite happens, for countries to become richer, it all starts with educating their population then giving them the freedom to create oppourtunity with their new knowledge.
interesting -this could mean one of two things is occurring
1. It may be indicating that interest rates are starting to have an impact - spending may be softening and companies are hesitating with hiring - and we will see a slow down in inflation - the softlanding.
2. It could also be an early indicator that stagflation may be starting to occur- which is the economy is stagnating -the hard landing
The GDP rate will be the next economic indicator. If its a soft figure then we may have entered an economic stagnation.
In the HLFS, the seasonally adjusted labour force participation rate was 70.9 percent, down slightly from 71.1 percent last quarter.
- For men, the labour force participation rate remained flat at 75.6 percent compared with last quarter.
- For women, the labour force participation rate was 66.4 percent, down slightly from 66.6 percent last quarter.
In the March 2022 quarter, compared with the previous quarter, 9,000 more people were not in the labour force (NILF), up to 1,197,000.
- 2,000 more men were NILF.
- 7,000 more women were NILF.
My guess would be immigration. New Zealands population pyramid doesn't have a bulge. While the New Zealand birthrate has collapsed over the last decade net migration has been allowed to surged to keep the working age population growing.
Chinese, Indian and African - Everyone and their dog wants to move to the Anglosphere right now.
Sorry, but I know these statistics pretty well, and the reporting across the board has been heavily biased. If you look objectively at the latest labour data (including weekly jobs filled, earnings, quarterly LCI, under-utilisation etc) it is very clear that wage increases are topping out - concluding that we are on the verge of a wage / price spiral is a massive leap. Certainly not worth throwing people on the dole to avoid.
What is also worth saying is that corporate profits are up 68% year on year. Where is the discussion about a profit / price spiral? There is a lot more evidence for that.
I was being a bit tongue in cheek to be fair. What is clear though is that the *dominant* driver of price increases in many sectors internationally has been higher profits. Most economists in the US have stopped arguing about whether excess profits are a factor and are now trying to work out how much they are responsible for. Estimates are around 50%!!
Yes of course, I have looked at the data all the way back to the 90s. Corporate tax receipts (a proxy for profits) have actually tracked the house price index for the last 20 years or so. I am not saying they are related, just giving you some idea how much corporate profits have increased!! Funnily enough, it doesn't seem to get reported...
Covid has of course disrupted all the economic data - creating weird baselines for annual increases. However these same issues also apply to wages data, CPI etc.
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