Jobless rate rises to 5.7%; Auckland construction jobs drive employment growth

New Zealand's jobless rate rose in the first quarter as the nation's labour force recorded its biggest increase in 12 years and Auckland drove an increase in employment growth.

The unemployment rate rose to 5.7% in the first quarter, from a revised 5.4% three months earlier, Statistics NZ said. The labour force increased by 38,000, or 1.5%, the largest increase since December 2004. The participation rate rose to 69% from 68.5%, while the employment rate edged up to 65.1% from 64.9%.

While employment is growing, wage inflation as measured by the Labour Cost Index remains subdued, rising at 0.4% in the quarter for an annual rate of 1.6%. That tallies with the Reserve Bank's assessment that record migration is not only boosting economic growth but also increasing the labour force, keeping a lid on wage inflation.

"Wage growth is set to remain muted and an area of concern for the Reserve Bank as it tries to generate added inflation pressure," economists at ASB Bank said before today's release. They said continued weak wage inflation would highlight the downside risks to the inflation outlook and would probably reduce any doubts the central bank has about cutting the OCR again in June.

Auckland, the biggest beneficiary of immigration and a city grappling with surging property prices, recorded a 2.9% increase in employment and accounted for 49% of overall New Zealand employment growth in the 12 months ended March 31, the government statistician said.

Total employment across the country grew by 2%, or 47,000 people in the year, although the employment rate is down 0.3% from a year ago because of the increase in the working-age population.

The total working age population rose by 0.8% in the March quarter to reach 3.69 million, the largest quarterly increase since the series began in 1986.

The New Zealand dollar advanced after the data. It recently traded at 69.35USc, from 69.18USc immediately before the 10:45am release.

The construction industry recorded the biggest gain across sector groups, with a 17,500 increase in the latest year. Much of the growth was in Auckland where forecast growth is expected to require an estimated 32,000 extra jobs through to the likely peak in 2018.

(BusinessDesk)