Unemployment rate rise contradicts economists

The unemployment rate unexpectedly rose in the March quarter to 3.9 per cent from 3.6 per cent at the end of last year, Statistics New Zealand said today.

Economists had expected the seasonally adjusted data to record a fall to a new 20-year low of 3.5 per cent.

It is the first rise in the unemployment rate since December 2003.

Employment was still the highest ever recorded at 2.06 million and the participation rate was the second highest at 67.6 per cent.

However, those figures were overshadowed by a 7.9 pecent rise in the number of people unemployed to 83,000. Nearly all of that came from a rise in male unemployment. Female unemployment remained relatively unchanged. The unemployment rate remains historically low -- the third lowest since SNZ began the series 20 years ago.

Economists had forecast a small increase in employment of 0.2 per cent. There was a 3.2 per cent fall in part-time employment and a 0.8 per cent rise in full-time work. The number of people employed rose by only 1000 during the quarter. The hours worked fell by 1.8 per cent against a 1.5 per cent in the December quarter and the participation rate fell to 67.9 per cent from 68.3 per cent.

The silver lining to the worse-than-expected data is that it shows the economy has started its long awaited downturn and it may make the Reserve Bank less inclined to hike interest rates at its next review on June 9.

The Maori unemployment rate fell to 8.8 per cent against 8.9 per cent in the December quarter while the pakeha rate rose to 3.1 per cent from 2.3 per cent. The Pacific peoples rate rose to 6.7 per cent from 6.5 per cent.

Despite the poorer than expected figures, the Government's goal of getting more females in the work force seems to be on track. The female participation rate rose to 60.8 per cent from 60.7 per cent in the December quarter.

The 0.3 per cent fall in male employment in the quarter was the first quarterly drop in four years.

Annual employment growth slowed to 3.4 per cent (67,000) from 4.4 per cent in the December year.

There was a sharp rise in the unemployment rate in some regions. In Auckland it rose to 4.2 per cent from 3.3 per cent. The rate in the Waikato rose to 4.2 per cent from 3.1 per cent while the rate in Wellington rose to 4.8 per cent from 3.9 per cent and Otago rose to 4.5 per cent from 3.3 per cent.

The Gisborne/Hawke's Bay saw a fall to 4.4 per cent from 4.6 per cent while the Taranaki rate fell to 3.6 per cent from 4.2 per cent. Tasman/Nelson/Marlborough/West Coast still has the lowest rate but it rose to 2.7 per cent from 2.3 per cent.

Westpac economist Donna Purdue said the RB would be less inclined to hike interest rates in June.

"The rise in the unemployment rate would appease them a little bit," she said.

"Also the fact that employment growth was flat over the quarter."

She said the RB had been focusing on supply constraints in the economy and the rise in the unemployment rate would ease pressure in the labour market.

However, she added the labour market remained tight.

She said it appeared there had been a broad-based easing of employment growth "which I guess is good thing in that it is not in one specific area".

She said the expansion of the working age population by more than expected accounted for most of the rise in unemployment.

The workforce participation rate had held up well.

Ms Purdue said that combined with other indicators, there was evidence of economic growth moderating.

"I think this is evidence that growth in the economy is starting to moderate."

- NZPA