Wage growth slow except in construction

Wage growth remained subdued in the March quarter, at least outside the construction industry in Christchurch.

Statistics New Zealand's labour cost index recorded an increase of 0.5 per cent in private sector salaries and ordinary time wage rates in the quarter, making 2.1 per cent for the year and matching economists' expectations. Such a pace of wage growth was very much consistent with inflation outcomes within the Reserve Bank's target band, Deutsche Bank chief economist Darren Gibbs said.

When the public sector - about a quarter of the workforce - is included the increase was 0.4 per cent for the quarter and 2 per cent for the year.

In the construction sector the average increase in salary and ordinary time wage rates over the past year was 4.7 per cent nationwide and 7 per cent in Christchurch.

For the 57 per cent of pay rates which rose over the past year, the average increase was 3.8 per cent, the biggest in two years. But pay increases were skewed towards the higher-paid; the median increase was 3 per cent. It has been 2.9 or 3 per cent for the past two years. In the private sector the average pay rise has steadily increased from 3.6 to 4 per cent over the past two years. But again the better paid have been doing best; the median increase has been an unwavering 3 per cent.

Meanwhile, the quarterly employment survey (QES), also released yesterday, was weak. Unlike tomorrow's household labour force survey the QES is based on a survey of employers. It recorded no increase in the number of filled jobs in the March quarter, and a 1.2 per cent increase for the year.

The number of fulltime equivalent (FTE) employees, which counts two part-timers as equivalent to one fulltimer, has risen 1.1 over over the past year but just 0.1 percentage points of that was in the March quarter.

While the number of FTE employees rose 1.1 per cent in the past year the number of paid hours increased only 0.7 per cent, and in the latest quarter it fell 0.5 per cent. Gross weekly earnings rose a seasonally adjusted 1.1 per cent making 4.6 per cent for the year, in line with its average over the previous eight quarters.

The 4.6 per cent increase can be seen as the combined effect of a 1.2 per cent rise in filled jobs and a 3.4 per cent rise in average weekly earnings, or as the result of 3.9 per cent increase in average hourly earnings and a 0.7 per cent increase in paid hours.

ASB economist Jane Turner said the QES employment results were disappointing. Employment growth should have more momentum at this stage of the recovery.

"We continue to expect the labour market will continue to gradually recover in 2012, particularly as reconstruction activity starts to pick up in Canterbury. Job listings and building approvals figures are an encouraging sign that the rebuild is now on track to start around mid-year."

More broadly, however, the QES suggested the labour market recovery remained soft with wage inflation likely to stay contained through 2012, she said.

Goldman Sachs economist Philip Borkin said that while wage growth was not at a "run rate" that would alarm the Reserve Bank, it was occurring at a time when firms were reporting modest difficulty in finding skilled staff.