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MNI ANALYSIS: New Zealand Jobless Rate Up But Below NAIRU

By Sophia Rodrigues
     SYDNEY (MNI)  - New Zealand's unemployment rate rose slightly in the second
quarter but remained below the Reserve Bank's estimate of non-accelerating
inflation rate of unemployment, indicating monetary policy remains supportive of
its goal of maximizing employment. 
     The second quarter labor market statistics, published Wednesday, showed an
acceleration in wage growth mainly due to the impact of rise in minimum wages,
and together they support the RBNZ's on-hold for longer monetary policy stance. 
     Data published by Statistics New Zealand showed the jobless rate rose to
4.5% in Q2 from 4.4% in Q1, slightly higher than MNI median forecast for 4.4%
but remained lower than RBNZ's estimate of NAIRU of 4.7%. 
     The jobless rate rose mainly due to rise in participation rate as
employment rose more than forecast, up 0.5% q/q compared with MNI median
forecast for 0.4% rise. At 70.9%, participation remains close to record high of
     Along with rise in the jobless rate, an important measure of spare capacity
in the economy -- the labor underutilization rate -- rose to 12.0% from 11.9% in
Q1. The rise in underutilization came from equal contributions from people
unemployed and underemployed. This indicator will be important to watch if the
growth momentum in the economy slows in coming months.
     Private sector labor cost index rose 0.6% q/q, in line with expectation and
took y/y rise to +2.1%. The rise was mainly due to increase in minimum wages and
without that, the labor cost index rose just 0.4% q/q and 1.9% y/y. Apart from
minimum wages, the labor cost index received support from wage settlement for
care and support workers last year. Excluding that impact and the impact of
minimum wages, the labor cost index rose just 1.6% y/y. This suggest there is
still lack of broader wage pressures in the economy.
     Household Labor-Force Survey data for the second quarter published by
Statistics New Zealand on Wednesday:
                                               Q2    Q1
                                              (%)   (%)
Unemployment Rate                             4.5   4.4
MNI Consensus              4.4 (range 4.2 to 4.5)
Employed Q/Q                                 +0.5  +0.6
MNI Consensus            +0.4 (range -0.3 to 0.7)
Participation Rate      70.9 (range 70.5 to 70.8)  70.8
MNI Consensus           71.0 (range 70.8 to 71.1)
Private Sector LCI Q/Q                       +0.6  +0.3
MNI Forecast                                 +0.6
Private Sector LCI Y/Y                       +2.1  +1.9
Underutilization Rate                        12.0  11.9
--MNI Sydney Bureau; tel: +61 2-9716-5467; email:

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