Strong Labour Market Likely Continued In Q2

Q2 labour market data print on Wednesday and are expected to show business as usual with low unemployment but a pickup in quarterly wage increases. The unemployment rate is expected to be in line with the RBNZ’s forecast of 3.5%. A big surprise on the stronger side would likely be needed to shift the RBNZ from neutral.

• Unemployment rate forecasts are between 3.4% and 3.7% with local banks at consensus’ 3.5%. The participation rate is assumed to remain at 72%.
• Employment is expected to post 0.6% q/q and 3.1% y/y in Q2 after 0.8% and 2.5% in Q1. Projections are in a range of 0.3-0.9% q/q and 2.9-3.4% y/y. BNZ and ANZ are in line with consensus but ASB and Kiwibank expect it to be come in lower at 0.5% & 3.0%, while Westpac is forecasting a strong 0.8% & 3.4%.
• Private wages excluding and including overtime are projected to rise 1.2% q/q after 0.9% in Q1. Forecasts are between 0.8% and 1.4% q/q. ANZ and ASB are in line with consensus, Kiwibank is lower at 1.1%, Westpac and BNZ higher at 1.3% and 1.4% respectively. BNZ says that its forecast reflects the April 1 statutory wage rises which can flow onto other workers. It is also watching the public sector measure closely as there have been recent sizeable agreed increases.