Economists expect New Zealand's unemployment rate will have continued to fall when new figures are released. Photo / Getty Images
Economists expect New Zealand's unemployment rate will have continued to fall when new figures are released. Photo / Getty Images
The unemployment rate is expected to dip to its lowest level since the start of the Global Financial Crisis in 2008.
Stats NZ releases new labour market data for the third quarter on Wednesday at 10.45am.
Economists expect New Zealand's unemployment rate will have continued to fall, although they warnthat the Delta outbreak and lockdown will complicate the data.
ANZ and Westpac economists are both tipping the unemployment rate will fall to 3.8 per cent, while ASB sees it coming in at 3.9 per cent.
The last time unemployment was below 4 per cent was in June 2008, shortly before the worst effects of the GFC hit the economy.
"The latest Covid lockdown is likely to distort the headline unemployment rate lower. But even without that effect, we would have been looking at a stronger result," said Westpac chief economist Michael Gordon.
"There is substantial evidence that the demand for workers is running hot, relative to supply. As a result, we expect to see a further acceleration in wage growth."
ANZ chief economist Sharon Zollner said the data will be "noisy", mixing pre-lockdown momentum with the sudden stop as we went into level 4.
"There is a wide range of possible outcomes, really depending on how these two opposing forces balance out," she said.
"Given the strength in the first two months of Q3, it would take a loss of jobs in September almost as large as in April 2020 for filled jobs to decline on a quarterly basis."
That did not seem likely, she said.
"Firms have learnt the hard way over the past year that workers are incredibly scarce and valuable right now, so they will do their utmost to retain workers. The wage subsidy should have helped in that regard."
Looking ahead to 2022, ANZ expects the unemployment rate to continue falling, bottoming out at 3.5 per cent.
With all eyes on inflation risk, there will also be great interest in the Labour Cost Index, also released Wednesday.
"Upward pressure on wage inflation has been steadily building over the past year," said ASB senior economist Jane Turner.
"We expect the Labour Cost Index to increase by 0.8 per cent over the quarter, lifting annual wage growth to 2.6 per cent from 2.2 per cent."
Risks were heavily skewed to an even stronger outcome, she said.
"The labour market was incredibly tight (at least prior to the community outbreak), with firms consistently reporting difficulty in finding and retaining labour."
Adding to the pressure, the big lift in the third quarter Consumer Price Index confirmed a sharp increase in the cost of living and would fuel higher inflation expectations, reinforcing pressure for larger wage increases.
Reserve Bank Governor Adrian Orr. Photo / Mark Mitchell
The tight labour market presents a major challenge for the Reserve Bank, said Westpac's Gordon.
"In these conditions, even a temporary inflation shock can provide the spark for an ongoing series of wage and price increases," he said.
"Crucially, we expect both of these to be stronger than what the RBNZ assumed in its most recent forecasts in August. If we're right, that would further bolster the case for a series of OCR hikes over the coming months."
