NZ jobless rate falls to 4.9% in March quarter, participation rate rises to record

New Zealand's unemployment rate fell more than expected in the first quarter, however the continuing influx of migrants meant the labour force participation rate reached a fresh all-time high and wage inflation remained muted, data from Statistics New Zealand shows.

The unemployment rate fell to 4.9 percent in the three months ended March 31 from 5.2 percent in the December quarter, Statistics New Zealand said. Economists had been expecting the unemployment rate to be 5.1 percent. The New Zealand dollar rose to 69.60 US cents from 69.41 cents immediately before the figures were released.

Employment grew 1.2 percent in the quarter to 2.54 million while the working-age population grew 0.7 percent to 3.78 million. Economists had tipped a 0.8 percent rise in employment in the quarter. The participation rate was an all-time high of 70.6 percent as the working-age population continued to be bolstered by record migration.

Accommodation and food services and construction drove the increase in the jobs and Stats NZ said construction employment was starting to build in areas other than Auckland and Canterbury. Over the quarter, the nation's largest city of Auckland showed relatively flat job growth and Waikato was the only region that had strong job growth with a "significant increase of people in the construction industry," Stats NZ said.

New Zealand's swelling population means, however, any wage increases remained muted, adding to the challenges facing New Zealand's central bank. While inflation is finally back in the central bank's 1 percent-to-3 percent target band, the lack of wage inflation is one factor that will likely continue to see interest rates on hold for some time to come.

Today's data show wage inflation remained muted, with the ordinary time private sector labour cost index increasing 0.4 percent in the quarter. On the year, the ordinary private sector labour cost index was up 1.5 percent. The growth in private sector wages was the lowest it has been since the June 2010 quarter, Stats NZ said. The index rose 0.4 percent in the quarter and 1.6 percent on the year in the December quarter. Public sector wages rose 0.3 percent in the March quarter and 1.7 percent versus the same quarter a year earlier.

According to Stats NZ, total annual wage inflation, which includes both the public sector and the private sector, was 1.6 percent higher on the year in the March quarter, unchanged from the prior quarter. It noted it is the first time since the September 2011 quarter that wage inflation was below consumer inflation.

The figures showed total hours worked fell a seasonally adjusted 0.6 percent in the quarter to 84.6 million hours in an average week. They rose 4.3 percent on the year.

The recently added underutilisation rate, which seeks to measure the potential labour supply, was at 12.5 percent versus 12.8 percent in the December quarter. The decrease is due to a significant decrease of so-called "unavailable job seekers" who are people actively seeking work but not available to start immediately, Stats NZ said.

The quarterly employment survey, also released today, showed ordinary time private sector hours rose 0.3 percent in the quarter to $27.82 for a 1.1 percent annual gain. Ordinary time public sector wages rose 3.1 percent to $37.81 and were up 4.3 percent on the year.

(BusinessDesk)