Dollar drops on unemployment fall stats (+video)

By Jamie Gray, Businessdesk

The New Zealand dollar fell by more than half a US cent today after Statistics NZ (SNZ) labour data showed that the employment rate fell to its lowest point in 10 years in the December quarter.

Unemployment fell to 6.9 per cent in the quarter, down from 7.3 per cent in the September quarter.

The drop in the unemployment rate was entirely due to the largest ever quarterly decline in the participation rate - to 67.2 per cent from 68.4 per cent - meaning a large number of people left the labour force over the quarter.

SNZ said the employment rate fell by 0.8 percentage points to 62.6 per cent over the December quarter. It was the third consecutive fall in the employment rate, after employment had been relatively unchanged for about two years.

Westpac economists said SNZ's Household Labour Force Survey (HLFS) had come up with an "oddball assessment" of the labour market.

"The net result was negative market reaction, but we are sceptical of the survey results," Westpac said in a commentary.

The New Zealand dollar dropped by 60 basis points to US84.43c from US83.83c just after the release.

"Our assessment of the labour market has not really changed - it is still weak, but we do not believe that it has suddenly gotten sharply better or worse," Westpac economists said in a commentary.

The HLFS showed there was a 6 per cent decline in part-time work over the quarter, which caused a decline in overall employment.

"The labour market is still weak, but we do not believe that it has suddenly gotten sharply better or sharply worse," Westpac said.

ASB Bank chief economist Nick Tuffley said the survey results can be volatile, but showed that the labour markets of the Auckland and Canterbury had improved while the rest of the country had gone backwards.

The reported weakness in employment would reinforce the view that interest rates would remain on hold for a while further, Tuffley said.

ASB expects the Reserve Bank's official cash rate to remain on hold until March next year.

The unemployment rate fell 0.4 of a percentage point to 6.9 per cent in the December quarter, as the number of people leaving the workforce fell faster than the number of jobs available, according to the household labour force survey. Economists were picking a headline rate of 7.1 per cent in a Reuters survey.

The participation rate fell a record 1.2 percentage points to 67.2 per cent, the lowest level since September 2004, while employment shrank 1 per cent. Economists were expecting a participation rate of 68.5 per cent and quarterly jobs growth of 0.4 per cent. The number of people not in the labour force climbed 3.8 per cent in the quarter.

The figures come after the quarterly employment survey showed a pick-up in total filled jobs, and the Treasury this week said it expects the labour market to show gradual signs of improvement as the Canterbury rebuild gathers momentum.

Full-time employment grew 0.4 per cent to 1.71 million in the quarter, while the number of part-time jobs plunged 6 per cent to 486,000. Total jobs were down an annual 1.4 per cent, while unemployment was up 6.8 per cent from a year earlier. Actual hours worked declined 0.1 per cent to 73. 14 million hours, and was down an annual 1 per cent.

The annual decline in jobs was led by a 19 per cent plunge in self-employment, which has been falling from a peak in December 2011.

Otago had the lowest unemployment rate across the regions at 4.3 per cent, with Southland at 4.6 per cent and Canterbury at 4.9 per cent. Northland had the highest rate at 9.5 per cent. Auckland's unemployment rate improved to 7.2 per cent, while Wellington's rose to 7.9 per cent.

Youth aged 15 to 24 not in employment, education or training (NEET), a target demographic for the government, rose to 14.2 per cent, the highest level since March 2011, though coming at the end of calendar year when programmes typically end.

The number of jobless people fell to 284,500 from 294,900 a quarter earlier, and was up from 261,300 at the end of 2011. The number of people discouraged from seeking working because they believe they lack the appropriate skills rose 2,400 to 10,100 in the three month period.

Underemployment, which counts those people in part-time work wanting more hours, fell to 111,000 from 113,300 in the quarter, and was up from 105,100 a year earlier.

New Zealand's unemployment rate is now the 14th lowest among developed nations, below Canada's 7.2 per cent and above Israel's 6.7 per cent.


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