Unemployment drop won't move OCR
Interest rate rises are likely to remain on hold despite unemployment dipping below 6 per cent, a major bank says.
More people are working and unemployment has fallen to 5.6 per cent, Statistics New Zealand figures show.
The quarterly employment survey (QES) for the June quarter yesterday showed that the number of employed people was 2.33 million, a quarterly rise of 0.4 per cent and an annual increase of 3.7 per cent.
ANZ Research senior economist Mark Smith said there was little in the labour market data that would prompt the Reserve Bank to alter its "on hold" stance on the official cash rate, which stood at 3.5 per cent.
Movements in labour force participation and economic growth would determine how the bank's OCR moved, he said.
"This will determine whether the lid is kept on wage inflation," Smith said. "For now, it's a case of so far so good."
Statistics New Zealand labour market and households statistics manager Diane Ramsay said: "The unemployment rate fell from a revised 5.9 per cent to 5.6 per cent and is the lowest it has been since the March 2009 quarter", referring to the Household Labour Force Survey, also released yesterday.
Employment growth in Canterbury accounted for almost half of the total national employment growth over the year.
Employment in the region rose 37,200 people (11 per cent) in the year to June 2014.
The Canterbury employment rate increased by 2.6 percentage points to 70.2 per cent, while the unemployment rate dropped to 2.8 per cent - the lowest it has been since March 2008 - from the previous quarter.
The Canterbury unemployment rate is down 1.6 percentage points from 4.4 per cent in June 2013.
Canterbury employment growth was seen in the retail trade, accommodation and food services industry (up 12,400), and public administration and safety (up 6100). Employment in the construction industry continues to be strong, with 10,300 more people employed since the June 2013 quarter.
Council of Trade Unions president Helen Kelly said the figures showed unemployment was still much higher than pre-recession levels.
"Unemployment has at last fallen below 6 per cent, but at 5.6 per cent and 137,000 people it is still far higher than the 3.5 per cent in December 2007, so we know we can and should do much better," she said.
Wage inflation figures showed the average wage was only 1.4 per cent higher than it was five years ago, she said. "Workers are not getting a fair share of the growth in the economy."
Westpac Institutional Bank senior economist Michael Gordon said the headline wage figures had arguably overstated the underlying trend in wage inflation.
He said the 1.7 per cent annual rise in wages had been boosted by a lift in the minimum wage, which added about 0.1 per cent point to the result.
"Excluding this effect, wage inflation picked up a little but hasn't broken out of its recent range," he said.
Economic Development Minister Steven Joyce said the figures showed the economic recovery was picking up pace. "There's good job growth, good wage growth. The recovery is obviously continuing and continuing to gather good pace from an employment point of view."
Prime Minister John Key had repeatedly claimed that going into the election the unemployment rate would "start with a five", but despite record participation levels, unemployment had remained stubbornly at 6 per cent in March.
Labour's employment spokesman, Grant Robertson, said that despite the fall there were 32,000 more people out of work than when National took office in 2008.
"Along with commodity prices, it is once again Christchurch, with the rebuild work, that is skewing the figures with a regional unemployment rate of 2.8 per cent."