New Zealand employment unexpectedly fell for the first time in three years in the third quarter, driven by a decline in part-time workers, and the participation rate declined further from a record high.

Employment fell 0.4 percent in the three months ended September 30, for an annual gain of 1.5 percent, Statistics New Zealand said. The participation rate fell to 68.6 percent from 69.3 percent. The kiwi dollar fell to 66.52 US cents, compared to 67.05 cents immediately before the release.

Employment growth had been expected to grow 0.4 percent in the latest quarter, according to a Reuters survey, while the participation rate was expected to hold at 69.3 percent. The government data did confirm expectations for an increase in the unemployment rate to 6 percent from 5.9 percent, which both the central bank and the market had expected.

The government statistician didn't have a breakdown by industry of the drop in employment in the quarter. The figures showed part-time jobs fell 4.1 percent in the quarter, amounting to about 28,700 positions. Part-time positions tend to be seasonal and volatile. Total employment fell to 2.33 million from 2.35 million.


Employment rose by about 34,000 people in the year, which was attributed to demand in the construction industry, which added 20,500 jobs. Auckland contributed the biggest share of that, adding 14,700 jobs, while in Canterbury, there were 5,000 more jobs. Yet in both regions, employment growth slowed. Auckland's growth rate was 1.5 percent, down from 3.9 percent in the June year, while Canterbury's slowed to 1.3 percent.

The employment figures come after a survey showed businesses turned positive on the economic outlook and are more willing to hire workers, following a sharp deterioration of sentiment mid-year, when dairy prices plunged and before the recent partial global price recovery. The ANZ Business Outlook showed those firms planning to hire staff rose to a net 12 percent in October from 3 percent a month earlier. However, workers turned pessimistic in the third quarter, with fewer expecting a pay rise in a labour market where more people are looking for a job, based on the Westpac McDermott Miller survey.

Yet there are job losses as well, in sectors facing tougher conditions, such as the dairy sector. In September, Fonterra announced 227 job losses, adding to 523 laid off in July. And Westland Milk also flagged potential layoffs that month to cut costs in the face of the global slump in dairy prices.

Wage inflation was 0.4 percent in the quarter for an unchanged annual rate of 1.6 percent, based on the labour cost index. Private sector wages rose 0.4 percent in the quarter and 1.7 percent in the year, outpacing a 0.3 percent quarterly increase for the public sector for an annual 1.2 percent.

The quarterly employment survey showed average weekly ordinary time paid hours were unchanged in the quarter and rose 0.7 percent in the year.

See the full release from Statistics NZ here