New Zealand’s Q2 labour market report confirmed continued softening, with employment falling -0.1% qoq and unemployment edging up to 5.2%. That marks the highest jobless rate since 2020, though still slightly below consensus of 5.3%. Participation rate also dropped -0.2 points to 70.5%, its lowest since early 2021, suggesting a cooling in demand.
Wage growth offered a mixed signal to the RBNZ. The private sector wage index rose 0.6% qoq, higher than expected 0.5% qoq and up from Q1’s 0.4%. But annual wage inflation slowed from 2.5% to 2.2% — the lowest in over three years — hinting that longer-term wage pressures are easing.
The overall report doesn’t deviate much from RBNZ’s May projections and is unlikely to alter its near-term stance. With inflation running at 2.7% yoy in Q2, markets still expect one more 25bps rate cut from the current 3.25% this month. But the central bank is likely to stay cautious on signaling further easing until price and wage dynamics show more decisive downside momentum.
