HomeContributorsFundamental AnalysisFirst Impressions: NZ Labour Market March Quarter 2023

First Impressions: NZ Labour Market March Quarter 2023

The New Zealand labour market remains hot, if past its peak. Unemployment held steady at 3.4% and annual wage growth continued to pick up.

March quarter 2023 labour market surveys

  • Unemployment rate: 3.4% (prev: 3.4%, Westpac f/c: 3.4%)
  • Employment change: +0.8% (prev: +0.5%, f/c: +0.8%)
  • Labour costs (private, ordinary time): +1.0% (prev: 1.1%, f/c: 1.1%)
  • Average hourly earnings (private, ordinary time): +1.9% (prev: 0.9%, f/c: 1.3%)

The unemployment rate held steady at 3.4% in the March quarter. That was in line with our forecast, and marginally stronger than the 3.5% that the market and the Reserve Bank were expecting. The number of people employed rose by 0.8%, also in line with our view (and the December quarter was revised up from 0.1% to 0.5%).

The growth in employment is in part being driven by the fact that there are more people around to hire. The resurgence of migrant inflows saw the working-age population rise by 0.5% over the March quarter, compared to zero growth a year ago.

Even so, employment is still outstripping population growth. The remainder was driven by attracting more people into the labour force – the participation rate rose from 71.7% to 72.0%, another new record high.

The wage measures were strong, but a mixed bag relative to forecasts. The Labour Cost Index rose by 1% for the quarter, a touch lower than the 1.1% rise last quarter. Private sector labour costs were up 0.9%, while the public sector was up 1.3% as collective pay agreements, particularly in healthcare, came into effect.

On an annual basis the LCI was up by 4.3%, compared to 4.1% last quarter. Wage growth tends to be one of the most lagging aspects to the economic cycle, so it’s not surprising that we’d see annual wage growth continuing to accelerate at this point even as consumer price inflation has clearly passed its peak.

The Quarterly Employment Survey (QES) measure of average hourly earnings rose by 1.9% for the quarter, with annual growth picking up from 7.4% to 7.6%. This measure is quite choppy from quarter to quarter, so we don’t put much weight on the fact that it was higher than what we had pencilled in. But it does highlight that what workers are receiving in hand is now keeping up with the rising cost of living.

Overall, the details of these surveys can be summed up by looking at the unemployment rate. The labour market is tight (3.4% is still very low compared to history), albeit past its hottest point (compared to the record low of 3.2% last year), and it isn’t deteriorating in any meaningful way yet. Wage pressures haven’t yet peaked on an annual basis, but are getting close to that point.

Westpac Banking Corporation
Westpac Banking Corporationhttps://www.westpac.com.au/
Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.

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