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Liz Kendall, Senior Economist at ANZ, notes that the New Zealand’s labour market tightened unexpectedly in the September quarter, with the unemployment rate falling to 3.9% – the lowest rate since June 2008.

Key Quotes

“This was despite an increase in the participation rate to 71.1%, another all-time record.”

“Unemployment is below estimates of the level consistent with maximum sustainable employment. The labour market is stretched, with difficulty finding skilled labour at an elevated level. The underutilisation rate also dipped to 11.3% – the lowest since December 2008.”

“Employment growth grew a whopping 1.1% q/q to be up 2.8% y/y.”

“Wage inflation was modest, following the minimum wage boost in Q2. Our preferred measure of wages – the private sector Labour Cost Index – increased 0.5% q/q. Annual growth moderated from 2.1% to 1.9% y/y, with last year’s care worker settlement dropping out of the annual calculation. The increase in the minimum wage on April 1 continues to boost annual growth to the tune of 0.2%pts, including some spill-over effects.”

“We expect that wage inflation will increase further from here.”