KEY POINTS:
Figures out this week are expected to show a labour market that is still very tight, with unemployment low and wage growth high by historical standards.
ANZ National Bank economists expect tomorrow's reading on wage inflation to record a 0.9 per cent rise in private sector ordinary time
pay in the the December quarter.
That would push the annual rate to 3.3 per cent, a record high but barely enough to offset a 3.2 per cent rise in the consumers price index over the same period.
They expect wage growth to remain strong for some time, pointing to firms reporting in the Institute of Economic Research's quarterly survey of business opinion that it is only getting harder to find both skilled and unskilled labour.
And the historical lags between unemployment - which is at a record low of 3.5 per cent - and wage growth suggests the latter could remain as high as it is now for the next 12 to 18 months, or even go higher, they say.
The average forecast among market economists is for the unemployment rate to tick up to 3.6 per cent when Statistics New Zealand releases the December household labour force survey on Thursday.
In the September quarter employment contracted by 0.3 per cent, following very strong gains in the first half of last year.
But that was outstripped by a sharp fall in the female participation rate which measures the proportion of women of working age who are in the labour force, that is, either employed or actively seeking work.
ASB Bank economist Daniel Wills expects to see that drop in employment reversed in the December quarter and a modest rise in participation.
"We expect unemployment to average 4.1 per cent over 2008 - still a very low rate by overseas and historical standards." The average unemployment rate over the past 20 years is 6.2 per cent.
Westpac economist Dominick Stephens by contrast expects the unemployment rate to continue to fall, to 3.4 per cent, and to stay that low all through this year before declining further still to 3.1 per cent next year.
He bases these forecasts in part on the ageing of the population and a pattern of people withdrawing from the labour force altogether when the economic cycle goes into a down phase, which means they are not counted as officially unemployed.
The high unemployment rates of the late 1980s and 1990s were exceptional and reflected sudden structural changes in the economy, Stephens said. "There is no reason to expect a repeat of that period."
The market is forecasting employment growth of 0.4 per cent for the quarter but Stephens is more optimistic, picking 0.6 per cent.
Indicators such as business confidence and hiring intentions suggests even more than that, he said, but the same surveys also showed firms are finding it increasingly difficult to find the staff they want.
"Firms want to hire, but can't. Employment growth is being restrained more by a lack of available workers than a lack of jobs."
One reason is emigration to Australia. ASB expects migration figures due out today to show the net inflow of migrants to have dwindled to an annualised rate of about 6000. That would be about half the rate of 2005 and 2006.
* LIKELY FINDINGS
Dwindling net immigration.
A rebound in jobs growth.
A slight rise in the unemployment rate.
Continuing strength in wages growth as labour remains scarce.