Unemployment rises more than expected, jobs market on the turn

In the year to the June 2023 quarter, the employment rate reached 69.8 per cent, the highest rate recorded by the HLFS since the series began in 1986. Photo / Getty Images

The seasonally adjusted unemployment rate was 3.6 per cent in the June 2023 quarter, compared with 3.4 per cent last quarter, according to figures released by Stats NZ.

That was slightly higher than the consensus of economic forecasts at 3.5 per cent.

Unemployment, along with underemployment and the potential labour force, is one of the components that comprise underutilisation – a broader measure of spare labour market capacity than unemployment alone.

The underutilisation rate increased from 9.1 per cent (revised) to 9.8 per cent this quarter. The largest increase came from growth in underemployed part-timers, who wanted and were available to work more hours.

Wage growth still strong

Wage cost inflation, as measured by the Labour Cost Index (LCI), remained at 4.3 per cent in the year to the June 2023 quarter.

“Annual wage costs continued to increase at historically high rates this quarter, equal to the 4.3 per cent annual increase last quarter,” business prices delivery manager Bryan Downes said.

The unadjusted LCI increased 5.9 per cent in the year to the June 2023 quarter. The unadjusted LCI tends to increase at a higher rate than wage cost inflation, since it includes market costs as well as factors like employees’ individual performance or years of service.

For example, if an employee received a pay rate increase due to a rise in the cost of living, this would be reflected in both the LCI’s primary measure of wage cost inflation (adjusted LCI) and the unadjusted LCI.

However, if an employee gets a pay rate increase for quality reasons, such as acknowledging good performance, this would only be reflected in the unadjusted LCI.

Average ordinary time hourly earnings, as measured by the Quarterly Employment Survey (QES) in the year to the June 2023 quarter, increased 6.9 per cent to reach $39.53. This figure is the mean value of wages and salaries paid per hour excluding overtime in jobs measured by the QES, so it can rise or fall as the type of work being done changes.

Employment still strong

In the year to the June 2023 quarter, the number of people employed increased 113,000 (4.0 per cent) to 2,927,000. The employment rate reached 69.8 per cent, the highest rate recorded by the HLFS since the series began in 1986.

The employment rate for women increased to 65.4 per cent, the highest rate since the series began. The employment rate for men increased to 74.4 per cent, the highest rate since 1987.

Liam Dann is Business Editor at Large for the New Zealand Herald. He is a senior writer and columnist as well as presenting and producing videos and podcasts. He joined the Herald in 2003.