NZ: Unemployment rate fell to a nine-year low in the December quarter - Westpac

Michael Gordon Senior Economist at Westpac, notes that New Zealand's unemployment rate fell to a nine-year low in the December quarter, in line with their expectations.

Key Quotes

“However, a broader range of measures suggests that there is still some slack remaining in the labour market.”

“Wage growth remains very subdued, even after accounting for low inflation. – There is no urgency for the Reserve Bank to raise interest rates in this environment.”

“The New Zealand labour market tightened further in the December 2017 quarter, in line with our expectations. The unemployment fell from 4.6% to 4.5%, a new nine-year low. The number of people employed rose by 0.5%, and the participation rate fell only slightly from its all-time high in the September quarter.”

“The rate of unemployment fell steadily but gradually over the course of 2017. The pace of growth in the wider economy slowed in that time, but the labour market tends to be a laggard in the economic cycle – the unemployment rate didn’t start consistently falling until 2013, several years after the recovery from the Global Financial Crisis began. It may be that firms are still playing catch-up on staffing levels after the strong growth in activity in previous years.”

“We recommend focusing on the unemployment rate as the most reliable gauge of the labour market, as the details within the Household Labour Force Survey (HLFS) tend to be choppy. The June quarter survey showed softness in employment growth and participation, followed by a surge in both measures in the September quarter. The continued rise in employment in the December quarter suggests that the jump in the September quarter was largely a corrective move (though still overstating the strength of jobs growth to some degree).”