Unemployment in New Zealand remained unchanged near a record high in the third quarter, while wages rose the most since the streak began, increasing pressure on the central bank to keep raising interest rates.
The unemployment rate was 3.3%, matching the second quarter, Statistics New Zealand said in Wellington on Wednesday. Economists had expected a fall to 3.2%, which would have tied a record low. Employment rose 1.3% from the previous three months, more than economists had expected, while annual wage inflation increased to 3.8%.
Labor shortages and capacity constraints are contributing to rising inflation in New Zealand, prompting the Reserve Bank to raise the official cash rate to a seven-year high of 3.5%. While the Rbnz has rallied 50 basis points in each of the past five meetings, a more aggressive 75-point hike is forecast later this month, and some economists predict it will hit 5% earlier this month. 2023.
“Today’s report supports the need for further hikes in RBNZ rates,” said Jarrod Kerr, chief economist at Kiwibank in Auckland. “The labor market is too tight and exceeds a reasonable definition of maximum sustainable employment.”
The New Zealand dollar was little changed after the release, buying at US$0.58 at 11:55am in Wellington. Bond yields and swap rates rose as investors stepped up bets on higher OCR increases.
Over target
While the Rbnz does not have a numerical target for job growth or the unemployment rate, it has said employment is above the maximum sustainable level to be achieved. At 7.2% in the third quarter, inflation is above the central bank’s target range of 1-3%.
The RBNZ’s policy tightening has depressed asset prices and eroded business and consumer confidence, raising the possibility of a recession.
But the labor market is tight because of the lack of migrant workers. The border was fully reopened in August, two years after it was closed at the start of the pandemic.
Regular hourly wages for non-government workers rose 3.8% from a year earlier, the statistics agency said, citing the Labor Cost Index. This is the most since the series began in 1993. The measure was up 1.1% from the previous quarter, matching economists’ expectations.
Average regular hourly earnings for non-government workers increased 2.6% from the previous quarter and a record 8.6% from the previous year.
Today’s report shows labor force participation rising as the number of people not working or looking for work fell, reflecting strong demand for workers.
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