MNI POLICY: New Zealand Jobless Rate Up But Wages Accelerate

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By Sophia Rodrigues

     SYDNEY (MNI)  - Following are the main observations we made from the Labour

Market Statistics for the second quarter published by Statistics New Zealand

Wednesday:

     --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 data also 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. 

     --The jobless rate rose to 4.5% from 4.4% 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 71.1%. At 4.4%, the jobless rate was lower than RBNZ's estimate

of NAIRU of 4.7%. 

     --Private sector labor cost index rose 0.6% q/q, in line with expectation

and took y/y rise to +2.1%. The rise in labor cost index is likely to help

consumer price index inflation move closer to the RBNZ's 2% target mid-point. 

     --In Q2, the rise in labor cost index 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.

     --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.

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

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