Unemployment rises to 5%, better than expected (Update 3)

New Zealand's unemployment rate rose to 5% (seasonally adjusted) in the March quarter from 4.7% in December and 3.8% in March 2008, figures from Statistics New Zealand (Stats NZ show). The rise compared with economist expectations of 5.3%-5.4%. (Update 3 includes economists' response.) Unadjusted, the unemployment rate was 5.6%, as shown in the chart. The Kiwi dollar jumped on the news, initially above 59 USc before easing to the top ends of 58 USc. The unemployment rate reached a six year high in March after rising for the fifth consecutive quarter, Stats NZ said. The labour force participation rate fell over the quarter to 68.5% and the number of both full and part-time people employed fell, together down 1.1% or 24,000. The number of people not in the labour force increased by 24,000 (2.3 percent) over the quarter, to reach 1.06 million, Stats NZ said. In the labour force were 2.3 million. Economists are now at odds as to what they think the Reserve Bank will do with the Official Cash Rate in June, with ANZ economists saying they expect the central bank will hold it at 2.50%, while others are still holding out for a further 25 basis point cut to 2.25%.  For males, the seasonally adjusted unemployment rate rose to 5.1% from 4.6% in December, and for females the rate rose to 4.9% from 4.8%. "The working-age population continued to grow over the March 2009 quarter, partly due to positive net permanent and long-term migration. This increase in the working-age population, combined with the decreased labour force, resulted in the labour force participation rate decreasing by 0.7 percentage points over the March 2009 quarter," Stats NZ said. The labour force comprises those who are in work and those who are unemployed and are seeking work. The working age population comprises the labour force and those not in the labour force (unemployed but not seeking work). "It is normal for the participation rate to decline when employment levels fall, particularly coming from a position of a very stretched labour market," ASB economists Jane Turner and Nick Tuffley said. "Those exiting the labour market may choose not to look for new work, either for personal reasons or to continue studies. In addition, the weakening economy can produce a discouraged worker effect, in which job hunters give up the search as it becomes too difficult," they said. Unadjusted figures by age bracket show the unemployment rate for 15-19 year olds rose to 19.6% from 17.9% in December. This means about 33,000 unemployed who are looking for work from a labour force for the age group of 167,000. In the 20-24 yr old bracket, the unemployment rate rose to 12% from 7.3% in December, representing about 26,000 out of work out of a labour force of 223,000. The 25-29 and 30-34 age brackets showed unemployment rates at 4.8% and 4.9%, respectively. Each had about 11,000 unemployed out of labour forces of around 224,000. The unemployment rate for those aged 35-39 jumped from 2.7% in December to 4.3% in March (11,000 out of 255,000). For the 40-44 bracket, the rate rose half a percent to 3.6% (10,000 out of 267,000). Unemployment in the 45-49 year old bracket went from 2.7% to 3.9% (11,000 out of 276,000), and the 50-54 year old rate rose from 1.9% to 2.5% (6,000 out of 242,000). For 60-64 year olds, the rate rose from 2% to 3.4% (5,000 from 143,000).  Unemployment is expected to keep rising over 2009 before peaking around 8% in mid to late 2010. "The unemployment rate is still likely to approach 8% in the latter stages of 2010, though in 2009 the speed at which it rises may continue to be moderated by the extent to which labour participation falls. Either way, unemployment and underemployment are set to increase," the ASB economists said.