Unemployment falls to five-year low

04:07, Aug 06 2014

Interest rate rises are likely to remain on hold despite unemployment dipping below 6 per cent, ANZ 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 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 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 today.

Employment growth in Canterbury accounted for almost half of the total national employment growth over the year.

In the QES, demand for workers from established businesses rose 2.3 per cent.

Salary and wage rates, including overtime, increased 1.7 per cent from the previous year and 0.5 per cent in the quarter. That compared with annual consumer price inflation of 1.6 per cent.

Average ordinary time hourly earnings rose 2.5 per cent over the year, the QES showed.

The rise in private sector annual wage rate growth was influenced by the minimum wage rising by 3.6 per cent.

Public sector annual wage rate growth was unchanged at 1.2 per cent, Ramsay said.

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," he said.

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," he said.

"Disaster recovery is not an economic plan. Excluding Canterbury, the overall figure rises to around 6 per cent."

While the fall in the unemployment rate was larger than most analysts expected, First NZ Capital economic and strategy director Chris Green said this largely reflected the impact of the fall in the participation rate from a record level, which offset the impact of the weaker than expected rise in employment.