Unemployment figures expected to show labor market ‘as tight as a drum’

  • Banks expect Stats NZ to report unemployment fell to around 2.8% to 3.1%
  • Some think a low figure could tip the Reserve Bank to raise OCR by 0.75% next month
  • Despite a tight labor market, wage increases are expected to continue to lag inflation

Figures released this week should show official unemployment has fallen to a new low, but wage increases are still lagging inflation, economists say.

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

Some banking analysts believe that if the rate falls significantly, it could prompt the central bank to raise the official exchange rate (OCR) by 75 basis points to 3.25% in August, although all believe in a 50 basis point hike. basic OCR at 3%. remains more likely.

The official unemployment figure is based on a survey by Stats NZ of people looking for work.

* Can we trust the official unemployment number?
* Workers who don’t get a pay rise face a ‘virtual pay cut’
* A rate hike by the Reserve Bank to 2% looms after a 3.2% unemployment rate and 3% wage inflation

Westpac said only about a third of those on JobSeeker benefit were considered unemployed, and only about a third of those considered unemployed received JobSeeker benefit, describing the overlap as surprisingly low.

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

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


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

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

But there is no indication that the Reserve Bank’s recent policy of raising the OCR in 50 basis point increments isn’t working to cool demand in the economy, so it’s more likely, he said. declared.

Both globally and in New Zealand, debate is heating up over whether central banks should reduce inflation as quickly as possible or take longer to stave off the growing risk of recessions.

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

But U.S. Federal Reserve Chairman Jerome Powell appeared to signal a shift to a more adaptable U.S. strategy on Thursday, pushing U.S. stock prices higher.

ANZ predicts figures from Stats NZ will show hourly profits in the private sector rose 5.8% from the June quarter of last year, which would still be well below the annual inflation rate of 7 .3%.

Corporate tax receipts show profits have grown faster than wages during the pandemic.

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

Bank economists are now wondering whether unemployment will rise much or not at all this year.

Tom Pullar-Strecker/Stuff

Bank economists are now wondering whether unemployment will rise much or not at all this year.

SBA chief economist Mark Smith said the data would likely show the labor market was “tight as a drum”, forecasting unemployment to fall to 3%.

He also did not rule out a 75 basis point rate hike this month, although he described a 50 basis point hike as more likely.

Smith forecast the labor market to 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 broad in the second half of 2022 as a wage-price spiral unfolds.”

The Bank of New Zealand questions the Reserve Bank’s current forecast that unemployment will rise towards the end of the year, suggesting the June quarter figure may not mark the bottom.

He expected the labor market to “stay tight for some time, and possibly get even tighter in the near term.”

“This will continue to fuel wage inflation and fuel our view of problematic core inflation,” BNZ said.

Westpac’s acting chief economist, Michael Gordon, expected the official unemployment rate to hit 3.1%, as the Reserve Bank forecast.

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

“The first official restrictions and then staff absences during the Omicron wave meant that the average number of hours per worker was around 2% lower than normal in the December and March quarters,” he said. he declares.

“This metric should improve in the June quarter, as worker absences have been less severe in recent months, although still very problematic.”

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