ANZ: Cracks Appearing

ANZ note that “the labour market remained extremely tight in Q4, consistent with business survey data showing labour shortages were still the top constraint facing firms at the end of 2022. But cracks are beginning to show. Unemployment lifted 0.1ppt to 3.4%, driven by lower-than-expected employment growth. And the underutilisation rate ticked up to 9.4% (9.0% previously). Both numbers are higher than this time last year.”

• “Wage growth was mixed, but still concerning for the RBNZ.”
• “The Q4 data still show a labour market beyond ‘maximum sustainable employment’, but some signs of softening are beginning to show. And as we look to 2023, timely indicators point to a significant easing in labour market pressures, with job ads, monthly filled jobs growth, and employment intentions all easing significantly in recent months.”
• “Combine these timely indicators with Q4 CPI inflation coming in cooler than the RBNZ feared, and we see a strong argument for the RBNZ to hike ‘just’ 50bp in February, rather than the 75bp signalled by the November MPS OCR forecast.”