NZ third-quarter unemployment sinks to nine-year low

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New Zealand's jobless rate fell to a nine-year low in September while the impact of $2 billion pay equity settlement for care and support works stoked wage inflation. The kiwi dollar jumped almost half a US cent.

The unemployment rate dropped to 4.6 percent in the three months ended September 30 down from 4.8 per cent in June, Statistics New Zealand said in its household labour force survey. That's the lowest level since the December 2008 quarter when New Zealand was in recession, and below the 4.7 per cent predicted in a Bloomberg poll of 12 economists.

The local currency rose to 68.85 US cents as at 10.55am from 68.48 cents immediately before the release.

The participation rate rose to 71.1 per cent from 70 per cent in June as 54,000 more people entered the workforce, and marked a record. While the huge increase was a "little puzzling," labour market and household statistics manager Diane Ramsey said Stats NZ was confident in the integrity of the data.

"This is in line with stronger quarterly working-age population growth and near record high annual net migration," she said.

Employment rose 2.2 per cent in the quarter to 2.59 million and was 4.2 per cent higher than a year earlier. Economists had expected a 0.8 per cent quarterly gain. More than 85 per cent of the growth in employment was from full-timers, Stats NZ said. More than half the employment growth came from those aged 25-to-39 but there was also "statistically significant employment growth" for those aged 55-to-59 and 60-to-64.

Total actual hours worked increased 2.4 per cent in the quarter to 87,700 a week and the underutilisation rate, which measures the country's potential labour supply and unmet need for work, was steady at 11.8 per cent in the quarter and down from 12.3 per cent a year ago. It remains at the lowest level since December 2008.

Stats NZ's labour market data also included the labour cost index, which showed private sector wage inflation rose 0.7 per cent in the quarter for a 1.9 per cent annual increase. Public sector wage inflation was up 0.4 per cent in the quarter for a 1.5 per cent annual gain, and across both sectors, wage inflation rose a quarterly 0.6 per cent and an annual 1.9 per cent, marking the highest annual increase since the September 2012 quarter.

The data was impacted by the Care and Support Workers Settlement Act 2017, which came into effect on July 1.

"The settlement for 55,000 care and support workers as a key driver for the latest quarter's wage growth," said prices, accommodation and construction statistics senior manager Jason Attewell.

Stripping out the impact of that deal, LCI wages and salaries would have increased 1.6 per cent rather than 1.9 per cent.

In the September quarter LCI wage rates for the healthcare industry - both public and private - rose 2.2 per cent. By comparison, wage rates rose 0.4 per cent in the previous quarter, Stats NZ said.

The quarterly employment survey, also released today, showed private sector ordinary time average hourly earnings rose 1.2 per cent to $28.37 in the September quarter and were 2 per cent higher than a year earlier. Public sector ordinary time wages rose 0.6 per cent to $38.69 in September for an annual gain of 3.3 per cent.