Unemployment level nears four per cent

New Zealand's unemployment rate rose faster than expected during the March quarter to a seasonally adjusted 3.9 per cent, Statistics New Zealand's (SNZ) Household Labour Force Survey showed today.

The rise, from 3.6 per cent in the December quarter, was sharper than forecast, with private sector economists expecting a much milder uptick to 3.7 per cent.

The number of unemployed rose by 8000, or 9.9 per cent, to 86,000.

The survey also defied economists' expectations of a slowing labour market, with employment growing 1.1 per cent during the quarter, compared with the 0.2 per cent forecast.

SNZ also revised the December quarter employment growth rate to zero from earlier figures showing a 0.1 per cent decline.

That reversal will concern Reserve Bank governor Alan Bollard, who was looking for an easing in the tight job market.

Employment growth was wholly due to a 1.2 per cent increase in full-time employment, with part-time levels remaining relatively constant, SNZ said. The labour force participation rate -- which counts all those working one hour or more a week -- was up 0.6 of a percentage point to 68.5 per cent, the highest on record since the survey began in March 1986. That compares with private sector forecasts of 67.8 per cent.

The female participation rate was up 0.9 of a percentage point to 61.9 per cent, also a record.

The male rate was up 0.4 of a percentage point to 75.6 per cent, the highest since March 1989.

On an annual basis, unemployment was up 0.1 per cent , while the 2,108,000 people employed in the March quarter was up 2.6 per cent on a year ago.

Male employment was up 0.5 per cent and female employment up 1.5 per cent.

The total number of hours worked per week decreased by 1 per cent, compared with a drop of 2.4 per cent in the March 2005 quarter.

New Zealand's unemployment rate is the second-lowest in the Organisation for Economic Co-operation and Development (OECD).

Economists said the greater than expected jobs growth of 23,000 in the quarter pointed to a still tight labour market and backed up expectations interest rates would remain on hold.

"It is certainly going to put off those who were looking for an early easing," UBS NZ economist Robin Clements told Reuters.

"It hasn't provided any encouragement for the Reserve Bank to feel like the labour market is softening sufficiently."

Deutsche Bank chief economist Darren Gibbs said the figures backed up Tuesday's wage data showing strong growth in private sector wages.

He said the data suggested that gross domestic product growth bounced back in the first quarter after declining in December.

Tuesday's Quarterly Employment Survey showed average total hourly earnings rose 5.2 per cent to $21.63 in the 12 months to March -- the biggest March year increase since 1990.

The New Zealand dollar failed to capitalise on the stronger employment figures, trading at US62.32c from its US62.44c local open.

- NZPA