Unemployment Rate Hits All-Time Low As Labour Market Tightness Persists

Better risk appetite and firmer commodity complex sent NZD/USD rallying Tuesday, but the rate has shown a muted reaction to the local jobs market data this morning.

• The unemployment rate fell to its all-time low of 3.2% in Q4 from a revised 3.3% recorded in Q3, suggesting that the labour market continues to show acute tightness. The jobless rate was expected to remain unchanged.
• Nonetheless, employment grew slower than forecast, rising just 0.1% Q/Q over the three months through December. In addition, the participation rate unexpectedly slipped to 71.1% from 71.2%.
• Wages failed to impress and were up 0.7% Q/Q against the median estimate of 0.9%. On the other hand, average hourly earnings rose 1.4% Q/Q, beating the consensus forecast of 1.0%.
• It should be added that the data comes on the heels of five straight quarters of uninterrupted employment growth, with the latest slowdown representing a consolidation of those impressive gains.
• There was a marginal moderation in market pricing of RBNZ tightening after the release of jobs data, but a 25bp OCR hike this month remains fully priced in. Meanwhile, ASB revised their RBNZ call and now expect the OCR to peak at 2.75% in early 2023 (prev. 2.00%), after a series of 25bp hikes at each MPC meeting.
• Elsewhere, CoreLogic House Price Index rose 2.1% M/M last month after a 1.9% gain recorded in December. CoreLogic noted that the "shift to red in Aotearoa’s COVID-management plan brings another layer of uncertainty to the market" but "the impact of social restrictions is likely to be minimal."
• NZD/USD last trades flat at $0.6638, with bulls setting their sights on Dec lows located in the $0.6702/03 area. A break above that region would bring Jan 19 high of $0.6812 into view. Bears need a dip through Jan 28 low of $0.6530 to gain the upper hand.