An unexpected surge in the official unemployment rate to 3.6% for the June quarter has been linked to a large number of new entrants joining the labour market. This is the second-highest level of unemployment recorded since June 2021 and marks an increment of 0.2% on the 3.4% reached in the March quarter. It is also slightly above the market expectation of 3.5%.
28,000 jobs were added in the June quarter, bringing the cumulative total for the year to 113,000. A quarter of the employment growth was attributed to the tourism sector which has experienced a resurgence since the end of the pandemic. Employment in the tourism industry has been restored to pre-pandemic levels and accounts for a tenth of employees in the economy.
The increase in people looking to join the workforce has also been associated with a higher cost of living. Principal economist at Infometrics, Brad Olsen, has said that mothers were increasingly re-joining the workforce due to the higher expenses and higher wages being offered in the market.
The underutilisation rate that is used to measure spare labour capacity also rose to 9.3% in the June quarter, from 9% in the previous quarter. Wage growth has eased to 4.3% but remained high. Market forecasts had predicted a wage growth of 4.4%. The labour cost index was found to have dropped to 4.3% as hourly pay rates rose by 6.9%.
A slight increase was also registered when examining the overall working-age population. This figure rose to 69.8% in the June quarter, up from 69.5% in the previous quarter. The proportion of people counted as available for work increased to a record-high level of 72.4%.
According to Stephen Toplis, head of research at BNZ, the softened wage growth was a good indication that the Reserve Bank’s expectations that wage growth had peaked was proving true. He also noted the influx of migrants joining the labour market without adding pressure to wages was helping to ease the labour market.
However, even with this news, not all outcomes have been positive. The New Zealand dollar (NZD) lost ground following the jobs report, trading at 0.6093 against the USD during the European session. This fall of 0.91% has extended the NZD’s losses.
The softening labour market is also expected to provide the Reserve Bank with some comfort and make it unlikely that further interest rate hikes will be announced. The RBNZ forecasted in May that unemployment would likely rise to 4.1% by the September quarter.
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