More in jobs but wage rises still low

19:06, Feb 05 2014

Another 52,000 people got jobs in the second half of last year as the labour market booms, especially in Canterbury and Auckland, but national unemployment remains stubbornly high at 6 per cent and wage rises are low.

But by the end of the year, unemployment is likely to be down towards 5 per cent, and wage rises should be a little fatter as staff become harder to find, economists said.

Statistics NZ figures out yesterday showed remarkable jobs growth of 1.1 per cent in the December quarter, after a storming 1.2 per cent gain in the September quarter. Both quarters were much better than expected.

A stronger economy is flowing through into demand for more workers, with employment growth of 3 per cent in the past year - the highest rate since 2006. The strong job market backs up recent high consumer confidence and spending.

The big drivers in job gains were Auckland and Canterbury, especially in the construction sector as the earthquake rebuild gains more steam. There was also a lift in building related jobs in manufacturing and professional services, and a sharp lift in retail sector jobs in the second half of 2013, which economists called a "pleasant surprise".

"The labour market recovery is well under way," Infometrics economists said.


But the out-sized gains in jobs in Canterbury in the past three months took the gloss off the national jobs figures, economists said. ASB estimated a near 5 per cent gain in Canterbury in the quarter but just 0.3 per cent in the rest of the country.

And job market figures were not universally strong. Actual hours worked in the December quarter fell 0.3 per cent in the December quarter.

A growing economy and high business confidence were seeing a "long-awaited" lift in the job market Deutsche Bank said, though not rising labour costs yet. But as unemployment kept heading down, wages would start to lift more, probably towards the end of the year, Deutsche Bank said.

Most market watchers expected national unemployment to tick down to 6 per cent in the latest quarter as the economy improved, despite the rapidly rising net migration to New Zealand adding to the supply of workers.

But the better economic picture also means more people are getting back into the labour market, with the participation rate at almost 69 per cent. That means the unemployment rate only dipped slightly from 6.2 per cent in September to 6 per cent by the end of the December quarter, despite the rocketing jobs growth in the past six months.

New Zealanders returning from Australia are likely to be lifting the working age population and are out looking for jobs, economists said.

However, the outlook is for the jobs boom to keep rolling, with unemployment likely to head back towards 5 per cent by the end of this year, economists said.

At the same time as tens of thousands more people move into work, wage rises are still thin, with the closely watched private sector Labour Cost Index up just 1.7 per cent in the past year, almost in line with inflation at 1.6 per cent.

Wage rises tend to lag behind a growing economy and government belt-tightening is keeping public sector wages low, too, with average central government wages rates up just 1.2 per cent in the year. Central government wage pressures have not been weaker since 1999, Infometrics said, as the National government continued its push for cost savings.

Council of Trade Unions economist Bill Rosenberg said workers were missing out on a "fair share" as the unemployment rate remained high and wages were stagnant.

But ANZ senior economist Mark Smith said a strong economy with only a modest lift in the supply of labour would see inflation and wages rise.


Job market in the December quarter

24,000 more people employed in the December quarter

28,000 more people employed in the September quarter

Unemployment: 6 per cent (6.2 per cent in September quarter)

Employed: up 1.1 per cent (annual growth 3 per cent)

Participation rate: 68.9 per cent (up 0.3 per cent in quarter)

Average ordinary time hourly earnings: $28.03 (up 2.9 per cent in the year)