The unemployment rate rose to 5.2% in the June quarter. This was a smaller increase than we expected, but was in line with the RBNZ’s thinking.
- Unemployment rate: 5.2% (prev: 5.1%, Westpac f/c: 5.3%, RBNZ f/c 5.2%)
- Employment change: -0.1% (prev: 0.0%, Westpac f/c: -0.3%, RBNZ f/c +0.2%)
- Labour costs (private sector): +0.6% (prev: +0.4%, Westpac f/c: +0.5%, RBNZ f/c +0.6%)
New Zealand’s labour market remained soft in the June quarter. The unemployment rate rose slightly from 5.1% to 5.2%, and the number of people employed fell by 0.1% (with the previous quarter’s 0.1% rise revised to a flat outcome). This was, however, less of a decline than we were expecting based on the 0.3% fall in jobs in the Monthly Employment Indicator.
While the results were a little better than our forecasts, the key details were in line with what the Reserve Bank assumed in its May Monetary Policy Statement. As such, today’s surveys are unlikely to sway the Monetary Policy Committee’s existing stance heading into its August policy review. We see a 25bp OCR cut as highly likely, leaving the door open for further easing if needed, but with no strong signal about the extent or timing of any future rate cuts.
The labour force participation rate continues to play an important role in moderating the extent of the rise in unemployment. Participation fell from 70.7% to 70.5%, its lowest level since March 2021, with a particularly large fall among teenagers. This group was brought into the workforce to an unusual degree during the 2022-23 boom, when demand was running hot and migrant workers weren’t available. As conditions have softened, teens have tended to see the largest drop in employment as well, with many of them returning to focus on study rather than classifying themselves as ‘unemployed’.
Turning to wages, the Labour Cost Index (LCI) rose by 0.6% for the private sector, following a 0.4% rise in the March quarter. This was a little higher than the 0.5% that we expected, but was in line with the RBNZ’s forecast. The sectoral breakdown suggests there may have been a little more impact from the minimum wage increase than we gave it credit for (considering that it was raised by only 1.5% this year).
On an annual basis, the private sector LCI slowed from 2.5% to 2.2%, the slowest pace since June 2021. The message was similar across a range of wage growth measures: the analytical unadjusted LCI (which includes pay increases that are related to higher productivity), the proportion of roles seeing a pay increase, and the median size of wage increases, were all back to 2021 levels.
The Quarterly Employment Survey (QES) was an exception, with average hourly earnings for the private sector accelerating from 3.8%yr to 4.6%yr. However, this measure is not adjusted for changes in the composition of jobs, and is typically much more variable than the LCI.
