The Reserve Bank reckons employment is around its maximum sustainable level — the target it is now required to aim for.
Governor Adrian Orr stressed yesterday that considerable uncertainty surrounds estimates of where that level is, and that the bank looks at a range of indicators.
But it considers the risks to be balanced. Recent softening in economic growth might prove more persistent than it expects, especially given the state of business confidence.
The bank's central forecast is for the labour market to continue to tighten, unemployment to fall to 4.2 per cent and wage growth to pick up.
On the other hand, the supply of labour could tighten more than it forecasts if net immigration slows more than it expects, or labour force participation — the share of working-age people either employed or actively seeking work — were to ease back from its currently elevated level.
The latest quarterly labour market numbers, released last week, recorded an uptick in the unemployment rate, albeit from a nine-year low, to 4.5 per cent. There was also a drop in the annual growth in average hourly earnings — to 3.1 per cent, from 3.6 per cent in March.
It is much too soon to call a turning point in what have been improving trends in both those indicators. Both the participation rate and the employment rate remain exceptionally high by historical and international standards and the Reserve Bank expects them to remain there.
But the OECD, in its annual Employment Outlook report released last month, reflects on the downward shift, evident since the global financial crisis, in the Phillips curve — the inverse relationship between unemployment and wage growth.
Across the OECD as a whole, that seesaw is looking a bit bendy.
Wage growth, the OECD says, is still missing in action despite unemployment rates below or close to pre-crisis levels.
"At the end of 2017, nominal wage growth in the OECD area was only half of what it was just before the Great Recession for comparable levels of unemployment," it says.
"And even when inflation is taken into account, real wage growth is a long way off pre-crisis trends."
In New Zealand, the unemployment rate over the past five years has averaged 4.8 per cent, compared with 3.9 per cent in the five years to June 2008. The comparison flatters the earlier period, however, as the participation rate was 1.8 per cent points lower then.
Jobs growth in the latest period has been strong enough to accommodate both rising participation and a surge in the labour supply from strong net migration inflows.
Growth in average hourly earnings in the past five years has averaged 2.4 per cent, compared with 4.4 per cent in the pre-crisis period. However, when adjusted for inflation the difference virtually disappears.
Inflation in the five years to June 2008 averaged 3 per cent, compared with 1.1 per cent over the past five years, so real growth in hourly earnings has averaged 1.3 per cent in the latest period compared with 1.4 per cent 10 years earlier.
The Reserve Bank says real wages have been rising at historically normal rates. It is not, as its central forecast, expecting problematic acceleration.
It expects nominal wage growth to pick up as the labour market tightens, higher inflation expectations affect wage settlements and the promised further increases in the minimum wage benefit a growing proportion of employees.
If the decline in real wage growth in New Zealand has been gentler than the 1 percentage point drop for the OECD between the pre-crisis period and the past five years, one obvious reason for that gives no cause for comfort.
Labour productivity growth in the current growth cycle (since 2008) averaging 1.1 per cent is not all that much weaker than the 1.3 per cent of the previous cycle (2000 to 2008), in contrast to the deterioration from 2.3 per cent pre-crisis to 1.2 per cent in the past five years for the OECD as a whole.
The OECD attributes some of this productivity slowdown to the growing importance of "superstar" firms among which productivity gains — and market shares — are increasingly concentrated.
"Leading firms, at the technological frontier, have enjoyed strong productivity growth similar to that of the pre-crisis period, but follower firms have experienced sluggish productivity growth, widening the gap from the top performers."
Even though these dominant positions tend to be temporary, as firms at the technological frontier are continually being challenged by new and better innovators, it says this process drives down the labour share — the share of national income going to labour.
The Productivity Commission points to a similar dynamic here. Firms below the median for multifactor productivity provide most of the jobs and have tied up most of the capital.
It is the top quartile of firms for multifactor productivity which have the smallest share of the workforce and capital.
Ideally it would be the other way round, with the lion's share of those resources going to the firms which can make the most of them.
The OECD also attributes some of the sluggish growth in wages to skill mismatch.
Leading firms are in great need of highly-qualified personnel with high-level cognitive skills — such as complex problem solving, critical thinking and creativity — and social intelligence — social perceptiveness needed when persuading, negotiating and caring for others.
These skills are in short supply in many countries and people who possess them have been the main beneficiaries of wage growth, the OECD says.
Heightened readings for the difficulty in finding skilled labour have been a feature of the NZIER's quarterly surveys of business opinion for years now.
Training and life-long learning is one of the four main areas of focus for the newly launched tripartite forum of business, unions and government on the Future of Work.
Hopefully, that signifies a recognition on the part of the business community that firms cannot just poach and import their way to a skilled workforce.