Annual wage and salary rise slowest in nine years

Salary and wage rates grew just 1.5pc in the last year, says Stats NZ, the slowest rate in nine years. Photo / Hawkes Bay Today

Salary and wage rates as measured by the labour cost index (LCI) rose just 1.5 per cent in the year to the March quarter, the slowest rise in more than nine years.

Figures released by Statistics New Zealand (SNZ) today show public sector salary and wage rates, which include overtime, rising 2.3 per cent, while in the private sector the increase was 1.3 per cent.

Economists are now waiting for the important Household Labour Force Survey due out on Thursday, which will confirm whether or not job growth has taken place over the past few months.

In the March quarter, salary and wage rates, including overtime, grew 0.3 per cent, with the public sector up 0.5 per cent and private sector up 0.3 per cent.

The annual 1.5 per cent rise in the LCI was the lowest since the year to September 2000. It was a continuation of the steady decline in the growth of salary and wage rates, including overtime, from a peak of 4 per cent in the year to September 2008, the highest annual rise since the series started in 1992, SNZ said.

The Quarterly Employment Survey (QES), also published today, showed average total hourly earnings increased 2.1 per cent for the year to the March 2010 quarter, down from a 3.7 per cent increase recorded for the year to the December quarter.

ASB Bank economist Nick Tuffley said today's labour stats reflected "the lingering effects of the recession with a continued deceleration in wage inflation."

While the 1.5 per cent increase in annual wage inflation was the lowest since September 2000, the recovery in employment and hours paid was "encouraging and points to an improving labour market as firms look to increase output in response to improving demand."

Thursday's Household Labour Force survey was expected to show a recovery in employment over the first quarter, as the improvement in hiring intentions in business surveys late last year flowed through to actual activity.

Tuffley said he expected to see a 0.3 per cent increase in employment, with the unemployment rate falling to 7.1 per cent (from 7.3 per cent previously).

"Today's results alone would be unlikely to strongly sway the RBNZ either way toward a June or July OCR hike. Subdued income growth continues to weigh on consumer confidence, with the majority of households noting they remain worse off relative to year ago in confidence surveys.

This is likely to have played a part in the patchiness of activity data in the household sector in recent months, particularly retail sales," said Tuffley.

"However, indicators of employment strongly suggest the labour market has turned and the Reserve Bank can be increasingly confident of the underlying economic recovery taking place," he said.

"This paves the way for monetary policy tightening to commence and the Reserve Bank has stated in its statement last week that this would occur "over the coming months".

Senior economist at UBS NZ, Robin Clements, said "the general thinking by most is that the labour market is near a turning point."

Confirmation of this would wait until the first quarter Household Labour Force Survey due this Thursday.

Clements said 'his read' of today's wage data was that it "reinforces the likelihood of a June start by the Reserve Bank to removing monetary stimulus."

The latest annual increase in average total hourly earnings was the lowest since the year to the December 2004 quarter, SNZ said.

The QES results also showed that seasonally adjusted gross earnings increased 2 per cent for the year to the March 2010 quarter, while the seasonally adjusted total paid hours fell 0.1 per cent, and full-time equivalent employees fell 0.5 per cent to 1.31m.

For just the March quarter, compared to the three months to December, seasonally adjusted total paid hours were up 1.1 per cent, and total gross earnings up 0.7 per cent, while full time equivalent employees were 0.1 per cent lower.

The QES showed that the recent period of decline in labour demand had abated, SNZ said.

Filled jobs were up 0.1 per cent compared to a year earlier at 1.67m, as a 3.2 per cent rise in part time employment negated a 1.2 per cent fall in full time work.

In the March quarter, filled jobs were down 0.9 per cent, as part time employment fell 4.5 per cent due mainly to the seasonal fall in the education and training industry.

The LCI measures changes in pay rates for a fixed quantity and quality of labour, while the QES is designed to measure quarterly estimates of change in, and levels of, average hourly and average weekly pre-tax earnings, average weekly paid hours, and the number of filled jobs.

In the year to March the education industry had the biggest rise in salary and wage rates, including overtime, lifting 3.2 per cent, followed by health and community services with a 2.6 per cent gain, according to the LCI.

In the March quarter, manufacturing of non-metallic mineral products, and of transport equipment, machinery and equipment had the largest increases, with gains of 0.6 per cent.

- NZPA