Unemployment is expected to nudge up to a near nine-year high with jobs few and far between in the weak economy, further dampening wage growth, but allowing another interest rate cut in three weeks.
Stats NZ’s quarterly labour market numbers are due on November 5, with the headline unemployment rate expected to increase to 5.3% from 5.2% in the three months ended September, the highest since the December quarter 2016.
Economists said the data would reflect some steadying of the labour market after the recession, which usually lags other sectors.
“While there are some early indications that the job market is stabilising, we expect employment growth to be flat over the quarter,” Westpac senior economist Michael Gordon said.
“We expect that falling youth participation will continue to dampen the extent of the rise in the unemployment rate,” Westpac senior economist Michael Gordon said.
The GDP has now fallen in three of the last five quarters. (Source: 1News)
Most other employment indicators have been sliding in the past couple of years, such as the participation and underutilisation rates, and the number of jobs being created or lost.
“Firms’ employment intentions are positive and SEEK job ads have turned upward. But we suspect it is too soon for such things to meaningfully show up in… employment just yet,” BNZ senior economist Doug Steel said.
Wage growth still slowing, rate cut beckons
A weak jobs market has put pressure on wage growth, welcomed by the Reserve Bank (RBNZ) as taking some of the steam out of domestic inflation.
“Given the negotiating power is currently concentrated on the employer side of the table, we expect annual wage growth to slow,” ANZ senior economist Miles Workman said.
The consensus is for annual private sector growth of about 2.1%, which is the RBNZ’s forecast and would fit in with expectations of another 25 basis point official cash rate cut to 2.25%, a likely bottom point of the easing cycle.
Fifty point cut after ‘considerably larger than expected” second quarter GDP reading. (Source: 1News)
But an improvement in the labour market remained some time away, with a threat of an odd surprise.
Workman said businesses looked to have been holding on to staff.
“If the economic recovery is delayed for too long, firms may lack the balance sheet capacity to continue hoarding labour in anticipation of it… That means the unemployment rate could rise more than we or the RBNZ are forecasting.”
ASB senior economist Mark Smith was more optimistic.
“The worst is behind us, but we don’t expect to see a meaningful lift in employment unti 2026.”
By Gyles Beckford of rnz.co.nz
