Private sector wages take the lead

Wage growth picked up in the September quarter, albeit from historically low levels.

The broadest measure in Statistics New Zealand's labour cost index, which includes private and public sectors, and overtime as well as ordinary time pay rates and salaries, increased 0.5 per cent in the quarter, up from 0.4 per cent in June and 0.3 per cent in March.

Private sector ordinary time rates, which represent about three-quarters of the total, rose 0.6 per cent in the quarter, making 1.6 per cent for the year, up from 1.4 per cent in the June year.

These figures are intended to measure pay rates for the same quantity and quality of work and are adjusted to exclude merit increases, service increments and any change when a new employee replaces someone else.

Unadjusted wages, which include them, rose 1.3 per cent in the private sector and 1.1 per cent overall, pushing the annual increases to 3.4 per cent and 3.1 per cent respectively.

Public sector increases are now lagging the private sector as the fiscal belt is tightened. The annual increase was 1.3 per cent, the lowest since 1991.

Only 49 per cent of the pay rates surveyed increased at all over the past year.

Of those which did, the commonest increase was between 2 and 3 per cent. The average increase was 2.9 per cent, the lowest for nearly 10 years.

"Wage growth can still be classed as modest, which is unsurprising at this stage of the business cycle," Goldman Sachs economist Philip Borkin said.

"It should help to provide some support to consumer spending into 2011, although much depends on what households choose to do with it. We suspect balance sheet repair will remain near the top of that list."

The quarterly employment survey found total weekly gross earnings (a measure of labour income across the whole economy) has risen 3.7 per cent over the year to September, as more people worked slightly longer hours for slightly higher hourly rates.

The number of employees rose 1.6 per cent over the year on a fulltime equivalent basis, while average paid hours per employee rose 0.7 per cent and average hourly earnings 1.3 per cent.

Those annual increases mask some signs of softening in the most recent quarter, however. Paid hours rose 2.3 per cent over the year but just 0.2 per cent in the September quarter, while the number of filled jobs fell 1 per cent in the quarter - or 0.4 per cent seasonally adjusted, economists estimate - to be just 0.7 per cent up for the year.