Wednesday, February 4, 2015

Data Insight: New Zealand labour market

Key points:
  • New Zealand’s December quarter Household Labour Force Survey recorded strong employment growth of 1.2% over the quarter, better than consensus market expectations of +0.8%.  Annual employment growth stands at +3.5%.
  • The labour force grew a seasonally adjusted 36,000 over the quarter to a record high thanks to a rise in the working age population and an increase in the participation rate to 69.7% which also a record high.  While this is a sign of a healthy well-functioning labour market these factors conspired to deliver an increase in the unemployment rate to 5.7%, up from 5.4% in the prior quarter.
  • Wage inflation remained benign with the Labour Cost Index for all salary and wage earners up 1.8% over the year.  While this might appear surprising given the strong growth in the economy, it remains a function of strong employment growth currently being met by the rising supply of labour.
  • This result paints a picture of solid growth in the economy leading to strong employment growth but still benign inflationary pressures.   This supports the story that the RBNZ is on hold for the foreseeable future.