Unemployment in New Zealand was unchanged in the third quarter, while wages rose to their highest level since the start of the streak, putting pressure on the central bank to raise interest rates.
The unemployment rate was 3.3%, matching the second quarter, Statistics New Zealand in Wellington said Wednesday. Economists had expected a 3.2% drop, which would have matched an all-time 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%. With the RBNZ up 50 basis points in each of the past five meetings, some economists are predicting an even more aggressive 75-point rise later this month.
“Today’s report supports the RBNZ’s need for further rate hikes,” 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 increased their bets on higher OCR hikes.
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 also above the central bank’s target range of 1-3%.
Rbnz 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 showed labor force participation rising, while the number of people not working or looking for work fell, reflecting strong demand for workers.
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