“The market has taken the data as being relatively dovish,” BNZ economist Doug Steel said.
The data showed that employment fell, unemployment rose and the participation rate fell in the quarter.
”All that is saying is that the labour market is loosening and probably loosening a little more than some thought,” Steel said.
The key two-year swap rate, which can influence home mortgage rates – fell by about five basis points to 5.08 per cent on the news, while the NZ dollar dropped to US58.80c from US58.90c just before the release.
At 4.3 per cent this is the highest unemployment rate the country has experienced for three years, although still low by historical standards.
The average unemployment rate since Stats NZ started compiling it in 1986 has been 5.5 per cent — roughly in line with where economists expect it to peak in this economic cycle.
Over the year, unemployment rose 31,000 while total underutilisation rose 75,000.
Increasing unemployment and underutilisation among young people (aged 15 to 24 years) comprised over half the national increase in each of these measures of spare labour capacity. Annually, youth unemployment rose 21,000 and youth underutilisation rose 44,100 (not seasonally adjusted).
The employment rate declined annually due to working-age population growth.
The employment rate was 68.4 per cent in the March 2024 quarter, down 0.6 percentage points over the quarter and down 1.2 percentage points over the year.
Over the year, the number of people employed increased 36,000 to 2.9 million, while the working-age population increased 129,000 to 4.3 million.
The employment rate represents the proportion of working-age people who are employed. As the rate of employment growth over the year was less than overall working-age population growth, the employment rate declined.
“While the employment rate has declined from recent highs over the past year-and-a-half, it still remains high within the full Household Labour Force Survey (HLFS) time-series, which began in 1986,” Brunning said.
“There’s only one way to characterise the labour market report, and that’s weak,” said KiwiBank chief economist Jarrod Kerr. “People are stepping out of the market. Because demand for workers is waning.”
Average ordinary time hourly earnings, as measured by the Quarterly Employment Survey (QES), increased 5.2 per cent in the year to the March 2024 quarter, according to figures released by Stats NZ today.
Annual wage cost inflation, as measured by the labour cost index (LCI), was 4.1 per cent.”
Although wage cost inflation eased and average hourly earnings growth started to slow this quarter, annual growth remained high for the two surveys,” business employment insights manager Sue Chapman said.
Previously
Westpac senior economist Michael Gordon described the shifting labour market conditions as “a slow leak rather than a dramatic change”.
Westpac was forecasting 4.2 per cent unemployment,in line with Reserve Bank expectations.
“Employment is tracking ahead of what the Reserve Bank expected in its February monetary policy statement, but so is the migration-led growth in the workforce,” Gordon said.
“We think these two factors will balance each other out. Our wage growth forecast is a bit lower, though the difference is trivial. The upshot is that we’re not expecting next week’s report to offer much to shift the RBNZ’s thinking.”
Looking below the top-line numbers, the big question for economists will be: do they change the outlook for interest rates?
While the Reserve Bank no longer has to formally consider unemployment in its calculations, today’s labour market data will provide important insight into how fast the economy is slowing.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
If you have a burning question about the quirks or intricacies of economics, send it to liam.dann@nzherald.co.nz ... or leave a message in the comments section. He’ll try to answer in Inside Economics, a new column published every Wednesday.
