Employment data show positive signs
Job numbers are expected to tick up and unemployment drop towards 7 per cent in tomorrow's official Household Labour Force Survey, economists say.
The Quarterly Employment Survey and Labour Cost Index out yesterday suggested the economy was "making progress", according to Bank of New Zealand economist Doug Steel, with a labour market in reasonable shape.
Paid hours rose 0.6 per cent in the December quarter, which indicated that economic growth in the quarter was "solid, bordering on strong", he said.
Paid hours rose 2 per cent for the full year, a sign of an underlying improvement in the job market.
Official unemployment is 7.3 per cent, but tomorrow's figures are expected to show that improving to 7.1 per cent, with a 0.1 per cent lift in jobs, according to BNZ forecasts. Westpac picked unemployment would improve to 7 per cent.
But official unemployment figures have jumped around sharply in the past year, and the link with the Quarterly Employment Survey is seen as "loose". The QES figures out yesterday showed a 0.4 per cent rise in filled jobs, reflecting a 0.7 per cent rise in fulltime employment, though part-time jobs fell almost as much.
Annual wage inflation is running close to 2 per cent for private-sector wages. But just 55 per cent of those surveyed actually got a pay rise; the balance saw wages stay the same.
The combination of rising paid hours and average wage rises suggested reasonable income growth in the past year. Gross weekly earnings were up 4.6 per cent on a year ago, well ahead of the 0.9 per cent rise in inflation. That showed "real income growth" after inflation, BNZ said.
"This helps explain why consumer confidence is at solid levels," Steel said. He indicated that December quarter retail sales figures, to be published next week, would be strong.
"These are not signs that the labour market is weak," he said.
Westpac Bank senior economist Felix Delbruck said there were "unusually high" construction-sector wage rises in Canterbury, up 3.9 per cent in 2012. But wages were not rising in other industries or other parts of the country, suggesting pressures from the rebuild remained "well contained, at least for now".
Construction wages outside Canterbury rose just 2.3 per cent in the past year.
The job market was picking up from a weak September quarter, but numbers were still lagging behind economic growth, which is expected to lift 0.8 per cent in the December quarter. Businesses were still reluctant to take on new staff, he said.
There was little generalised wage pressure. But house building would double in the next two years and in time have a pronounced effect on wages and inflation. But for now, Delbruck said, the Reserve Bank would be happy to leave the official cash rate on hold, based on the latest data.
The Dominion Post