Former Economics Editor of the NZ Herald

Jobs up as labour force expands

Participation rate hits record high but unemployment rate steady as migrant flow boosts working age population.

The average hourly wage in the construction sector rose 5.4 per cent over the year to March. Photo / Greg Bowker
The average hourly wage in the construction sector rose 5.4 per cent over the year to March. Photo / Greg Bowker

Employment grew strongly in the first three months of the year but so did the supply of workers, leaving unemployment unchanged and wage pressures subdued.

Statistics New Zealand's household labour force survey recorded a rise of 22,000 or 0.9 per cent in the number of people employed in the March quarter, but that was matched by a 22,000 increase in the labour force, leaving the unemployment level unchanged at 147,000 and the unemployment rate steady at 6 per cent.

Over the year ended March the working age population increased by 50,000, boosted by a strong net inflow of migrants.

But the labour force grew by 82,000 over the same period as the participation rate (the employed and those looking for work, as a share of the working age population) climbed to 69.3 per cent - a record high and up from 67.9 per cent a year ago.

The increase in participation was strongest among people in their 30s, Statistics New Zealand said.

Over the year to March employment grew by 83,000 or 3.7 per cent, the largest increase since 2004.

Most (19,000) of the latest quarter's increase was in full-time jobs. Just over a fifth of the 2.3 million people employed work part-time, of whom just under a fifth say they are willing and able to work more hours.

The growth in employment was concentrated in Auckland and Canterbury, but the rest of New Zealand managed a 2 per cent annual increase.

Wage inflation, meanwhile, remains subdued.

See the full Household Labour Force Survey here:

The quarterly employment survey (QES) recorded a rise of 2.5 per cent in the average hourly wage over the year to March, slightly down on 2.7 per cent in the year to December 2013. In the construction sector the rise was 5.4 per cent.

The Reserve Bank's preferred measure of wage inflation - the labour cost index's series for private sector salary and wage rates, including overtime - rose 1.7 per cent, unchanged from the previous two quarters.

The LCI reflects what employers pay to have the same job done to the same standard. It filters out increases related to performance or years on the job.

Among the 54 per cent of wage rates which increased in the year ended March the median increase was 2.3 per cent, the smallest for 14 years, and the average was 3.1 per cent (3.3 per cent in the private sector and 3.3 per cent in the public sector).

Businesses chasing the consumer's dollar might be heartened by a 6.4 per cent annual increase in the QES measure of total gross earnings, a proxy for labour market income across the household sector, reflecting the combined effect of employment and wage growth. That is up from 3.9 per cent in the year to June 2013.

Westpac economist Michael Gordon said the record labour force participation rate of 69.3 per cent was impressive, "given that, as with all Western nations, we would expect to see demographic trends working against participation as more baby boomers reach retirement age." It raised questions about how much higher it could go in this cycle, before labour started to become a scarce resource again, he said.

"[But] the bottom line is that this just does not look like an economy that is currently running around 1 per cent above its non-inflationary potential, as the Reserve Bank assessed it to be in the March monetary policy statement."

See the Quarterly Employment Survey here:

- NZ Herald

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