Unemployment rate up to 6.5%; 150,000 unemployed (Update 4)

New Zealand's unemployment rate rose to a seasonally adjusted 6.5% in the September quarter from 6% in June, figures released by Statistics New Zealand show. This is the highest unemployment rate in nine years, Stats NZ said. The 6.5% unemployment rate was at the top end of economist expectations. (Update 4 includes charts.) ASB Chief Economist Nick Tuffley said the numbers were on the weak side of the Reserve Bank of New Zealand's outlook for unemployment and that this would reinforce its view that it won't have to raise the Official Cash Rate for some time yet. The Reserve Bank reiterated at the end of October that it expected the OCR to remain at 2.5% until the second half of 2010, despite markets pricing in a 25 basis point (0.25%) rate hike as early as January 2010. Stats NZ said there were now 150,000 unemployed in the labour force, an increase of 9% from June and up 54% from the same time last year. This was the highest number of unemployed in 15 years, Stats NZ said. The labour force participation rate fell to 68% from 68.4% in June, indicating some people have dropped out of the workforce altogether. Figures show there were 122,100 'underemployed' workers in the third quarter, from 114,300 in June and 82,000 a year ago. Underemployment is a measure of employed people who work part time but would prefer to work more hours and serves as a measure of underutilised labour in the economy. Here are Stats NZ's comments on the figures:

The September 2009 quarter Household Labour Force Survey (HLFS) showed further rises in unemployment and the unemployment rate, continuing the trend seen over the past seven quarters. The number of people unemployed reached its highest level in 15 years, while the unemployment rate hit a nine-year high. Employment continued to decline this quarter. Unemployment increased by 12,000 (9.0 percent) during the September 2009 quarter, to reach 150,000, the highest level since the March 1994 quarter. This increase was largely driven by male unemployment, which rose by 9,000. During the quarter, the unemployment rate increased by 0.5 percentage points, to reach 6.5 percent "“ the highest level since the March 2000 quarter. Employment fell by 17,000 (0.8 percent) during the September 2009 quarter and was driven by a decrease in male full-time employment. This decrease was partly offset by an increase in female employment during the quarter. The labour force participation rate fell by 0.4 percentage points during the quarter, to 68.0 percent. The total number of actual hours worked decreased by 0.7 percent during the quarter. The (unadjusted) working-age population continued to grow during the September 2009 quarter, partly due to positive net permanent and long-term migration.

Here is ASB economist Nick Tuffley's take on the figures:

Implications: reinforcement of a gradual recovery The RBNZ's September Monetary Policy Statement incorporated a Q3 unemployment rate of 6.4% and an annual employment decline of -1.4% (which implies around a 0.4% quarterly decline). The RBNZ will undoubtedly see today's numbers as on the weak side of its outlook, particularly if it tweaked its forecast to be marginally more positive in the lead-up to October's OCR review. The HLFS outcome will reinforce the RBNZ's view that it will not lift rates for some yet. We heavily discount the possibility of a January OCR hike that one commentator is forecasting. We also see March as too early given that key data come out in the month after that rate window. Our expectation remains that the RBNZ will start lifting interest rates in April.

Unemployment by age group: Age group figures are not seasonally adjusted like the headline figure of 6.5%. The total unemployment rate from the age group data is 6.3% in the September quarter from 5.8% in June (see chart below). The figures suggest those in the 20-24 year old age group are opting to not enter the labour force and look for work, instead choosing to enter or continue study or other training. The group's labour force participation rate, along with the number of employed and unemployed all fell over the September quarter. University intakes are during the March quarter and at the beginning of the September quarter.

• The unemployment rate for the 15-19 year old age group rose to 25.1% in the third quarter from 22.9% in June. The age-group's labour force participation rate fell for the third consecutive quarter, from 49.8% in June to 48.4% in September. Of the age-group's labour force, the number of employed fell 5.7% to 116,500 while the number of unemployed rose 6.8% to 39,100.
• The unemployment rate for the 20-24 yr old age group fell to 10.9% from 11.5% in June. Its labour force participation rate fell from 73.6% to 71.6% in September. Of its labour force, the number of employed fell 1.3% to 193,200 while the number of unemployed fell 7.5% to 23,600.
• The unemployment rate for the 25-29 age group rose from 5.6% to 6.8% over the quarter. Its labour force participation rate fell from 80.9% to 80.7%. Of its labour force, the number of employed fell 0.9% to 210,200 while the number of unemployed rose 21.4% to 15,300.
• The unemployment rate for the 30-34 age group rose from 4.6% to 5.3%. Its participation rate remained at 81.9%. The number of employed fell 0.7% to 207,300 while the number of unemployed rose 13.9% to 11,500.
• The unemployment rate for the 35-39 age group rose from 4.1% to 4.4%, the same as in March. Its labour force participation rate rose from 82.5% to 84.1%. The number of employed rose 1.1% to 245,200 while the number of unemployed rose 6.7% to 11,200.
• The unemployment rate for the 40-44 age group rose from 3% to 4%. Its labour force participation rate fell from 85.8% to 85.3%. The number of employed fell 1.6% to 254,400 while the number of unemployed rose 32.5% to 10,600.
• The unemployment rate for the 45-49 age group fell from 3.7% to 3.5%. Its labour force participation rate fell from 87.4% to 86.4%. The number of employed fell 0.7% to 268,300 while the number of unemployed fell 5.8% to 9,700.
• The unemployment rate for the 50-54 age group rose from 3.4% to 4.2%. Its participation rate fell from 87.1% to 84.8%. The number of employed fell 2.8% to 230,800 while the number of unemployed rose 22% to 10,000.
• The unemployment rate for the 55-59 group rose from 3.4% to 3.8%. Its participation rate fell from 81% to 79.7%. The number of employed fell 1.6% to 189,300 while the number of unemployed rose 10.1% to 7,600.
• The unemployment rate for the 60-64 age group rose from 2.5% to 2.7%. Its participation rate rose from 67% to 68%. The number of employed rose 2.4% to 146,600 while the number of unemployed rose 8.1% to 4,000.
• The unemployment rate for those aged 65 and over rose from 1.3% to 2.2%. Its labour force participation rate rose slightly from 15.9% to 16%. The number of employed remained the same as in June at 81,800 while the number of unemployed rose 72.7% to 1,900.