Job creation and wage growth in New Zealand slows down

New Zealand’s jobless rate was unchanged in the first quarter as the number of jobs created roughly matched the growth in thee workforce, while wage costs remained contained, backing views the central bank can hold rates for the forseeable future.

The unemployment rate was steady at 5.8 percent, with about 16,000 jobs created, while the participation rate hit a record high of 69.4, according to official data on Wednesday.
Statistics New Zealand said it had revised previous data to reflect growth in the population in the 2013 census.
The labour cost index of private sector wages, released at the same time, rose 0.3 percent on the previous quarter, with the annual rate steady at 1.7 percent.
Forecasts were for a jobless rate of 5.5 percent, employment growth of 0.8 percent, and a 0.4 percent quarterly rise in wages.

The following are some comments from economists regarding the jobs data today:
MICHAEL TURNER, STRATEGIST, RBC CAPITAL MARKETS:
“You’ve got reasonable strong employment growth, but higher unemployment and weak wage growth, so all these signs point to a fairly sedate inflation environment as it has been the case for several years.

“The RBNZ is very sensitive to wage data. This data sits pretty well with our view that the cash rate is moving lower. We are very comfortable it will happen some time this year. We see a cut in June and this supports our case.”

TOM KENNEDY, ECONOMIST, JPMORGAN:
“The story behind these drivers is that the strong migration flows back into New Zealand is pushing up the participation rate, which means employment growth is strong, the participation rate is strong and as a consequence the unemployment rate is treading water and not moving lower.
“That said, it is at 5.8 percent, which is quite low by historical standards, so it is still a fairly reasonable outcome.”

FELIX DELBRUCK, ECONOMIST, WESTPAC:
“It is softer than expected data. Employment grew strongly over the quarter but this was matched by a big lift in labour supply so job participation rose to a new record high.
“What it means is that while jobs are growing strongly there’s still plenty of spare capacity in the labour market. We saw that in the unemployment remaining steady and we saw it in surprisingly soft wage numbers.
“At the margin, it does add to the case for the Reserve Bank to cut rates. That’s not our call at the moment but the data add to the case for that, and the Reserve Bank will looking at these numbers closely.”

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