Unemployment figures set to show job market ‘as tight as a drum’

Unemployment figures set to show job market 'as tight as a drum'

  • Banks expect Stats NZ to report that unemployment has dropped to around 2.8% to 3.1%
  • Some believe that a low number could lead the Reserve Bank to increase the OCR by 0.75% next month.
  • Despite the tight labor market, wage increases are expected to remain below inflation

Figures released this week will likely show that official unemployment has fallen to a new low, but that wage increases are still significantly behind inflation, economists believe.

The Reserve Bank predicted in May that Stats NZ would report on Wednesday that official unemployment had fallen to 3.1% in the three months to the end of June from 3.2% in the previous quarter.

Some analysts at the bank believe that if the rate drops significantly, it could prompt the central bank to raise the official cash rate (OCR) by 75 basis points to 3.25% in August, although all believe a 50bp increase in OCR to 3%. remains more likely.

The official unemployment number is based on a Stats NZ survey of job seekers.

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Westpac said that only about a third of those with JobSeeker benefits were counted as unemployed, and that only about a third of those counted as unemployed received the JobSeeker benefit, describing the overlaps as surprisingly small.

The ANZ said there was a lot of uncertainty about where the official unemployment rate would land, although it is more likely to be between 2.6% and 3.5%.

Its central forecast is that official unemployment will fall to 2.8%.


Aotearoa unemployment in New Zealand is at very low levels, but that masks some of the groups that are being left behind, says economist Matt Roskruge.

A low number could put a 75bp increase “on the table” as the Reserve Bank prepares to release its next monetary policy statement on Aug. 17, the ANZ said in a research note.

But there was no sign that the Reserve Bank’s recent policy of increasing OCR in 50bp increments wasn’t working to cool demand in the economy, so that was more likely, he said.

Both globally and within New Zealand, debate is growing over whether central banks should rein in inflation as quickly as possible or take longer to avoid the growing risk of recessions.

The Reserve Bank kept its eyes steady on inflation when it raised the OCR to 2.5% earlier this month.

But US Federal Reserve Chairman Jerome Powell appeared to signal a shift to a more adaptive strategy in the US on Thursday, pushing up US stock market prices.

ANZ Forecast Figures from Stats NZ would show that hourly earnings in the private sector were up 5.8% from the June quarter of last year, which would still be significantly below the annual inflation rate of 7.3%.

Corporate tax revenues show that profits have increased faster than wages during the pandemic.

“Whatever the numbers come in, we think next week’s data details will likely confirm what many Kiwi companies already know; the job market is incredibly tight and workers are becoming an increasingly scarce resource,” said ANZ.

Bank economists are now questioning whether unemployment will rise much, if at all, this year.

Tom Pullar Strecker/Coisas

Bank economists are now questioning whether unemployment will rise much, if at all, this year.

ASB senior economist Mark Smith said the data is likely to show the job market “as tight as a drum”, predicting unemployment will fall to 3%.

He wasn’t ruling out a 75bp rally this month either, though he described a 50bp increase as more likely.

Smith predicted that the job market would remain tight until at least the end of this year.

“Wage growth is expected to accelerate to its highest annual rate since 2008 and become increasingly broader in the second half of 2022 as a price and wage spiral unfolds.”

The Bank of New Zealand is questioning the Reserve Bank’s current forecast that unemployment would rise towards the end of the year, suggesting the June quarter figure may not mark the low point.

He expected the job market “to be tight for a little while longer, if not tighter in the short term.”

“This will continue to fuel wage inflation and feed our view of a troubled core inflation,” the BNZ said.

Westpac’s interim chief economist Michael Gordon had expected official unemployment to reach 3.1%, as per the Reserve Bank’s forecast.

An interesting aspect to note would be the number of hours worked during the quarter, Gordon said.

“First official restrictions, then employee absences during the Omicron wave meant that the average hours per worker was about 2% lower than normal in the December and March quarters,” he said.

“This measure should improve in the June quarter as worker absences have been less severe in recent months, although they are still an issue.”

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