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Analysts at TD Securities noted that the Sep Q unemployment rate slumped to a post-GFC low of 3.9% as employment expanded by +1.1%/q, and despite the participation rate revisiting the record high of 71.1%.

Key Quotes:

“In 2018 to date, jobs growth has been led by Healthcare, Professional services and Retail trade, almost all in full-time (chart right).”

“Wages growth is still not responding to this drum-tight labour market, rising by an as-expected +0.5%/q and +1.8%/y (chart left). Business complaints about the rising labour cost bill still isn’t reflected in the official data.”

“For the RBNZ tomorrow (preview to be published separately): at 3.9% the economy has already achieved ‘maximum sustainable employment’. Inflation is racing towards 2% sooner rather than later, and not just via energy prices. The RBNZ cannot avoid these simple facts at tomorrow’s OCR Review/Monetary Policy Statement and needs to bin its rate cut scenario.”

“An unchanged OCR at 1.75% tomorrow is unanimous consensus, as are expectations for upgraded GDP/CPI forecasts due to outsized upside surprises to Q2/Q3 respectively. How this translates into the Bank’s cash rate profile, however, is not so transparent.”