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On Tuesdays at 22:45 GMT the employment report from New Zealand will be released. According to the  NAB FX Strategy Team, Q1 jobs market data was probably robust but they warn that likely prone to a statistical wobble or two.

Key Quotes:  

“With the financial markets still vacillating on an OCR cut for next week, this Wednesday’s labour market data could yet be a swing factor. Base case, we expect them to retain a decent degree of robustness. However, the risks seem tilted to the data appearing a bit mixed this quarter, even if just in a statistical sense. We saw from the Q1 CPI how markets react to this sort of thing. That is to say, aggressively.”

“We anticipate a 0.5% increase in total employment, as per Wednesday’s Q1 Household Labour Force Survey (HLFS). This would sustain annual growth of 2.3%, and be enough to nibble the unemployment rate back down to 4.1%, from the 4.3% it jumped to in Q4 of 2018. This is predicated on the participation rate holding relatively high, at 70.9%.”

Market expectations are not quite as robust as ours, all considered. While they have a median identical to us on quarterly HLFS employment, namely 0.5%, they are 0.1% under on the annual, with 2.2%. And the market’s 70.9% expectation on the participation rate translates to an unemployment rate of 4.2% for Q1, versus the 4.1% result we anticipate.”

We expect Wednesday’s data to show a 2.1% annual rate of inflation in the private-sector LCI (the same as the Bank anticipates). Note that this entails “just” 0.4% inflation in Q1 itself, compared to Q4’s 0.5%, but that a slowing in Q1 compared to Q4 has been the historical pattern. So focus on the annual result for a sense of the trend.”

“The trajectory on wage and salary inflation is certainly something to keep in mind re monetary policy. But just how precisely this will indicate “maximum sustainable employment” is a moot point. Sure, the February MPS stated that “The Reserve Bank interprets maximum sustainable employment as the highest utilisation of labour resources that can be maintained without creating an acceleration in inflation.” But that seemed a reference to CPI inflation rather than wage inflation per se.”