Employment outlook takes a dip

New Zealand's working-age population grew 0.7 per cent in the second quarter. Photo / Thinkstock

New Zealand employment confidence turned pessimistic in the third quarter, falling to a three-year low, with fewer workers expecting a pay rise in a labour market where more people are looking for a job.

The Westpac McDermott Miller Employment Confidence Index fell to 99.3 in the September quarter, from 102.8 three months earlier.

The present conditions index slipped to 92.9 from 96.1 and the employment expectations index dropped to 103.6 from 107.3.

New Zealand's working-age population grew 0.7 per cent in the second quarter, outpacing a 0.3 per cent rise in employment in the face of record migration, which is keeping wage inflation tame.

In the 12 months ended June 30, the private sector labour cost index rose 1.8 per cent, "which isn't much above the lows reached during the global financial crisis", said Westpac Banking Corp senior economist Satish Ranchhod.

"The number of workers expecting a pay increase over the coming year has fallen to its lowest level since the survey began in 2004," Ranchhod said.

"This is a particular concern as the recent fall in the New Zealand dollar will result in the prices for many goods pushing higher over the coming months. As a result, many households may find their budgets becoming increasingly stretched over the coming year."

Across 11 regions, seven recorded a decline in employment confidence, with the gloomiest sentiment in Northland, which became slightly less pessimistic in the third quarter at 91.6 compared with 90.2 three months earlier.

In Auckland, confidence dropped to 100.7 from 107.8, holding just above the 100 level that separates optimists from pessimists.

Waikato's confidence fell to 96 from 96.7.

Ranchhod said challenges in the dairy and forestry sectors were weighing on confidence in regions such as Northland, where they are major employers.