MNI ANALYSIS: New Zealand Jobless Rate Dn; Underutilization Up

--Spare Capacity Up Despite Fall in Jobless Rate

By Sophia Rodrigues

     SYDNEY (MNI)  - New Zealand's unemployment rate fell to a nine-year low and

labor participation rate remained close to record high but a slowing in labor

cost index and increase in spare capacity in the economy means the Reserve

Bank's monetary policy is likely to remain on hold for longer.

     Data published by Statistics New Zealand Wednesday showed the jobless rate

fell to 4.5% in Q4, the lowest since the December 2008 quarter, and compares MNI

median forecast for 4.6%. Employment grew 0.5% q/q, higher than 0.3% rise

expected by economists. Participation rate fell to 71.0% vs 71.1% in Q3 but this

was in line with MNI median forecast.

     However, despite the strong headline numbers, a broader measure of spare

capacity -- the labor underutilization rate -- rose to 12.1% from 12.0% in Q3.

Since December 2015, the jobless rate has fallen from 5.0% to 4.5% but labor

underutilization rate decreased from 12.4% to 12.1%, indicating spare capacity

isn't diminishing at the same rate as the jobless rate suggests. 

     The slowly diminishing spare capacity is reflected in wage growth data

which showed the labor cost index rose just 1.8% y/y in Q4 slower than 1.9%

increase in Q3.

     Both spare capacity and wage growth have greater relevance for the RBNZ's

monetary policy than the headline jobless rate. 

     Household Labor-Force Survey data for the fourth quarter published by

Statistics New Zealand on Wednesday:

                          Q4    Q3

----------------------------------

                         (%)   (%)

Unemployment Rate        4.5   4.6

MNI Consensus            4.6

Employed Q/Q            +0.5  +2.2

MNI Consensus           +0.3

Participation Rate      71.0  71.1

MNI Consensus           71.0

Labor Cost Index Y/Y    +1.8  +1.9

Underutilization Rate   12.1  12.0

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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