Unemployment dips, but wage growth still sluggish

The unemployment rate has dipped to 4.2 per cent in the March 2019 quarter, down from 4.3 per cent in the December 2018 quarter, Stats NZ said today.

This remained higher than the record low of 4 per cent recorded in September was in line with the Reserve Bank's expectations.

However, wage growth has remained modest at an annual rate of 2 per cent annually.

The labour cost index (LCI) salary and wage rates (including overtime) increased 2.0 per cent in the March 2019 year, while the unadjusted LCI increased 3.4 per cent.

The unemployment rate for men was 3.9 per cent in the March quarter, down from 4.4 per cent last quarter. For women, it was 4.5 per cent, up from 4.2 per cent.

Annually, public sector and private sector wage inflation both were 2 per cent.

In 2018, several collective agreements have come into force, which have raised wage inflation, such as the nurses' collective agreement (signed in August last year).

"We are likely to see further increases to wages over the next couple of quarters, as ongoing pay disputes are settled and the minimum wage increase of $1.20 to $17.70 an hour on 1 April 2019 flows through," labour market and household statistics senior manager Jason Attewell said.

"Lower-paying industries such as retail, and accommodation and food services are most affected by increases to the minimum wage, so we can expect to see growth in these areas next quarter."

The LCI measures movements in wages for a fixed quantity and quality of labour. This means changes in pay rates due to the performance of employees or promotions are not shown in the index.

The unadjusted LCI, on the other hand, also reflects the change in wages because of a change in quality of work (eg more experience). This series is more comparable with the earnings measures in the QES.

Key facts

- Unemployment rate fell to 4.2 per cent.
- Underutilisation rate fell to 11.3 per cent.
- Employment rate fell to 67.5 per cent.
- Filled jobs fell 0.1 per cent.
- Average ordinary time hourly earnings rose to $32.00.
- Wage rates increased 2 per cent annually.