There’s no question that the latest labour market numbers are ugly.
At 5.3% for the September quarter (up from 5.2% in June), the new unemployment rate is the worst in almost nine years.
As ASB economist Mark Smith points out, in nominal terms, the 160,000 people that figure represents is the highest since 1994.
The unemployment rate for those aged between 15 and 24 has hit 15.2% and the number of young people who are not in employment, education or training has risen to 13.8%, up 1.4 percentage points annually.
Then there are those who have some work (so don’t qualify as unemployed) but not enough work.
An additional 138,000 Kiwis are in that category.
Around the country, the unemployment rate varied widely – generally looking better the further south you go.
In Northland and Auckland, the unemployment rate is now 6.3% and 6.1% respectively.
In Waikato it is 6.2% and Bay of Plenty 5%.
In the South Island, the rate is just 3.7% in Southland and 2.5% in Otago.
Meanwhile, wage growth continues to trend down.
The private sector Labour Cost Index rose 0.4% from the previous quarter, with annual growth slowing 0.2% points to 2.1%.
That’s below the rate of annual inflation at 3%.
But economists seem confident that the tightening of the labour market, engineered by Reserve Bank (RBNZ) rate rises last year, is now at a turning point.
“At least it is starting to look like net job loss is a thing of the past,” said BNZ head of research Stephen Toplis.
“Sure, there was no employment growth in the September quarter, but zero followed four quarters of negatives.”
Rising job ads and expectations that GDP growth was now resuming suggested next quarter’s change could be the most positive since December 2023, Toplis said.
Providing further supportive evidence for this conclusion was the fact that hours worked actually rose 0.9% in the quarter – the first quarterly increase in seven, he said.
ASB senior economist Mark Smith suggested the unemployment rate has peaked.
“It has been a difficult period for the NZ job market, with a net 45,000 jobs being shed since the December 2023 peak in employment,” he said.
“The worst is behind us, but we don’t expect to see a meaningful lift in employment until 2026.
“We expect the economy to remain on the expansion path, but the large margin of existing spare capacity within the current workforce and pronounced uncertainty may result in firms parking hiring plans until the recovery becomes established.”
But modest growth in the labour force should continue to cap the unemployment rate, he said.
ANZ’s Miles Workman said the results were “mixed” relative to expectations.
“But the overall message is clear,” he said. “Past monetary tightening has achieved what the RBNZ intended – the emergence of disinflationary spare capacity.”
The RBNZ’s focus had now shifted to engineering a recovery, “with the aim of avoiding more persistent scarring effects in the labour market”, he said.
“We find ourselves now in a classic turning-point situation: the lagging labour market data confirms more disinflation pressure in the pipeline, but the timelier activity data is confirming that the economy is responding to the cuts already seen.”
Kiwibank economists noted that wage growth continued to moderate.
“More and more workers are receiving smaller and smaller pay rises,” said Kiwibank economist Mary Jo Vergara.
“For example, the number of workers receiving a pay rise above 2% but below 3% has been steadily increasing for the last two years.”
Employers’ wage bill (private sector Labour Cost Index) rose 2.1% over the year – the lowest since March 2021, she said.
“That’s quite the drop from the 4.5% peak and a return to a smidge above the pre-Covid average.”
The labour market appeared to be stabilising, she said.
“But the degree of slack still in the market should provide the RBNZ with comfort that inflation will return to the 2% target next year.”
There was a consensus among economists that the RBNZ would be comfortable with cutting the Official Cash Rate again later this month.
Liam Dann is business editor-at-large for the NZ Herald. He is a senior writer and columnist and presents and produces videos and podcasts. He joined the Herald in 2003.