Unemployment rises to 4.2 per cent as wages hit 10-year high

Wage growth has accelerated but has been aided by government policy. NZH File Photo.

The unemployment rate rose to 4.2 per cent in the September 2019 quarter, up from 3.9 per cent last quarter, Stats NZ says.

The rise in the unemployment rate comes after a drop to an 11-year low in the June 2019 quarter.

The slight uptick was largely in line with the expectation of economists.

Wage growth for the quarter was the strongest in more than a decade although it received a boost from Government policy and state sector pay settlements.

The labour cost index (LCI) salary and wage rates (including overtime) increased 2.4 per cent in the year to the September 2019 quarter.

Annually, public sector wage inflation was 3 per cent, and private sector wage inflation was 2.3 per cent.

Average ordinary time hourly earnings increased by 4.2 per cent annually, while both the public and private sectors increased by 3.9 per cent annually.

"Overall, the results appear to be a modestly positive surprise for the Reserve Bank," said Westpac senior economist Michael Gordon. "In August the RBNZ was forecasting an unemployment rate of 4.4 per cent for the September quarter."

The unemployment rate appeared to have flattened off over the last year, rather than rising, as had been expected with wider economic slow down, he said.

"Jobs growth has softened...but this has been offset by a drop in labour force participation, particularly among the older age groups as they choose early retirement."

Meanwhile wage had been stronger than expected, lifted by a greater than expected impact from pay settlements for teachers, nurses and police, Gordon said.

But private sector wage growth also hit a 10-year high of 2.3 per cent.

The seasonally adjusted employment rate remained steady at 67.5 per cent in the September 2019 quarter.

The employment rate for men also remained steady at 72.2 per cent, while the employment rate for women dropped slightly to 62.9 per cent, down from 63.0 per cent last quarter.

Over the quarter, 6,000 more people were employed. The rise in the number of employed people was largely influenced by men (up 6,000), while the number of employed women also rose slightly (up 1,000).

Annually, the number of employed people increased by 23,000.

Using unadjusted figures, over the year, the number of people in full-time employment increased by 51,800, which reflected 33,400 more women.

The number of people in part-time employment (working fewer than thirty hours per week) decreased by 28,000 over the year, which reflected 21,900 fewer women.

There were signs in the data that the labour market had peaked even though the unemployment rate remained at historically low levels, said ASB senior economist Mike Jones.

"The unemployment rate may still be very low, but we think this overstates the tightness of the labour market."