MNI ANALYSIS: New Zealand Labor Mkt Sub-NAIRU But Wage Subdued

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By Sophia Rodrigues

     SYDNEY (MNI)  - New Zealand's unemployment rate fell further in the first

quarter and underutilization rate also dropped but wage growth remained subdued

despite reduction in spare capacity in the economy.

     The data supports the Reserve Bank of New Zealand's on-hold for longer

monetary policy stance.

     Data published by Statistics New Zealand Wednesday showed the jobless rate

fell to 4.4% in Q1, matching a rate last seen in December 2008 as the number of

employed rose and participation rate fell slightly. Despite the decline,

participation rate remained close to record highs.

     Underutilization rate fell to 11.9% from 12.2%, matching a rate last seen

in Q2 of 2017.

     At 4.4%, the unemployment rate is well below the RBNZ's estimate of

non-accelerating inflation rate of unemployment (NAIRU) of 4.7% but wage

pressures continue to remain muted. Private sector labor cost index rose 0.3%

q/q, below MNI median forecast for 0.4% rise, and kept y/y pace unchanged at

1.9%.

     Wage inflation is expected to get some boost from rise in minimum wages

from April 1. The minimum wage will increase by 4.8% from NZ$15.75 per hour to

NZ$16.50 per hour and is expected to affect around 3% percent of the labour

force, the RBNZ said in February.

     However, wage inflation could face an opposing influence from slowing in

headline inflation in Q1. Consumer price index inflation rose just 1.1% y/y in

Q1, slowing from +1.6% in Q4. In recent years, past inflation outcomes have

played a bigger role in influencing wage outcomes.

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

Statistics New Zealand on Wednesday:

                                               Q1     Q4

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

                                              (%)    (%)

Unemployment Rate                             4.4    4.5

MNI Consensus              4.5 (range 4.3 to 4.7)

Employed Q/Q                                 +0.6   +0.4

MNI Consensus             +0.6 (range 0.3 to 0.8)

Participation Rate                           70.8   70.9

MNI Consensus           71.0 (range 70.8 to 71.1)

Private Sector LCI Q/Q                       +0.3   +0.3

MNI Forecast                                 +0.4

Private Sector LCI Y/Y                       +1.9   +1.9

Underutilization Rate                        11.9   12.2

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

[TOPICS: MTABLE,MANDA$,MANDS$,MMNRB$,M$A$$$,M$N$$$,MT$$$$]