The unemployment rate was steady at 5.1% in the March quarter, better than market expectations. Wage growth continues to slow.
- Unemployment rate: 5.1% (prev: 5.1%, Westpac f/c: 5.3%, RBNZ f/c 5.2%)
- Employment change: +0.1% (prev: -0.2%, Westpac f/c: +0.1%, RBNZ f/c 0.0%)
- Labour costs (private sector): +0.4% (prev: +0.6%, Westpac f/c: +0.4%, RBNZ f/c +0.6%)
The March quarter surveys confirmed that the New Zealand labour market remains subdued, although they weren’t quite as soft in the details as we were expecting. The implications for the Reserve Bank are mixed, with slightly better employment figures but a greater slowdown in wage growth than they had assumed in their February Monetary Policy Statement.
The unemployment rate held steady at 5.1% in the March quarter, against market forecasts for another small rise. The number of people employed rose by 0.1%, much in line with what had been signalled by the Monthly Employment Indicator (MEI). That followed a 0.2% fall in the December quarter (revised down from an initial reading of -0.1%), and leaves employment down 0.7% on a year earlier.
The small rise in employment was almost in line with the 0.2% rise in the working-age population (less than the 0.3% that we had assumed). A further drop in the labour force participation rate accounted for the remainder, leaving the unemployment rate unchanged. While this was only a partial factor in the March quarter results, we’ve seen a marked drop in youth participation in particular in recent quarters, with the tougher jobs market seeing young people returning to or spending longer in study rather than actively looking for work.
The Labour Cost Index (LCI) rose by 0.4% for the private sector, in line with our forecast but below the RBNZ’s expectation of 0.6%. The public sector LCI rose by 0.9%, led by a collective pay agreement for teachers. On an annual basis, the private sector LCI slowed from 2.9% to 2.5%.
The analytical unadjusted LCI, which includes pay increases that are related to higher productivity, rose by 0.7% for the private sector, the smallest quarterly rise since December 2020. Fewer roles have seen pay increases over the last year, and the average size of those increases has moderated.
