It was also seen as backing the case for a 50-basis-point (bps) rate cut from the Reserve Bank on November 27 and lessening the argument for a 75bps cut.
Westpac NZ markets strategist Imre Speizer said there was a minor gain in the Kiwi/Aussie cross rate to A90.6c from A90.4c after the release.
”In terms of what it means for the Reserve Bank, it’s roughly neutral. It’s moving in the right direction, but it does not endorse the case for those who have speculated on a 75bps cut, so it has taken that mostly off the table,” he said.
The figures were a mixed bag in terms of market and RBNZ expectations, said ASB senior economist Mark Smith. But they showed that the protracted activity downturn was “now catching up with the labour market”.
“The balance of power is shifting away from employees, with employment levels contracting and the unemployment rate rising,” he said.
“It could have been much higher (in the region of 5.3%) if it were not for sharply falling labour force participation, hardly a sign of labour market strength and suggesting potential job seekers are finding it that much harder to find work.”
The smaller-than-expected rise was due to more young people exiting the labour force, said Westpac chief economist Michael Gordon.
“The fall in participation appears to have been strongly concentrated among young people (15-24 years old),” Gordon said.
“In the initial post-Covid period, the economy was running hot and the border closure meant that migrant workers weren’t available. In this time, many young people were drawn into the labour force to fill the gap – often at the expense of study.”
“As the economy has slowed and migration has rebounded, this group has been at the forefront of job losses. While this has led to a rise in the number of unemployed, we’re also increasingly seeing young people return to or remain in study, ending their job search altogether.”
KiwiBank senior economist Mary Jo Vergara said the labour market was even weaker than the headline suggested.
“The devil is in the detail. Worker demand has waned, and unemployment is drifting higher,” she said.
The sharper decline in labour force participation, from 71.7% to 71.2% was itself a sign of a weak jobs market.
“Workers are now heading (or are forced) for the exits as demand wanes.”
Wage growth has slowed
In the year to September 30, all salary and wage rates, including overtime, increased 3.8%.
That compared with 4.3% in the year to the June 2024 quarter.
Average ordinary time hourly earnings in the quarterly employment survey rose 3.9% in the year to the September 2024 quarter, compared with 5% in the year to the June 2024 quarter.
Employment rate
The seasonally adjusted employment rate fell to 67.8% in the September quarter.
That was down from 68.4% in the June 2024 quarter and 69.3% in the September 2023 quarter. Stats NZ data today showed 2.9 million people were employed in the September 2024 quarter.
That was not a major change from the previous year, but it was a smaller proportion of the working-age population, which grew 75,000 annually.
“While net employment remained stable, there were changes in who was employed over the year, as 45,700 more people who had been recently employed became jobless,” Brunning said.
“Compared with last September quarter, there were about a third more people reporting they had left their last job through redundancies or business shutdowns.”
The number of jobless people who had been employed in the past five years and left a role due to layoffs, redundancies, or business closures rose 34.5% annually to 55,000 (not seasonally adjusted).
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.
