Unemployment data due Wednesday will probably show another record low which, in a sign of the inflationary times, will be largely viewed as bad news for the economic outlook.
The jobs market likely tightened further in the second quarter, economists say.
That means the official unemployment rate, as measured by StatsNZ's Household Labour Force Survey (HLFS), is expected to dip to another record low for the modern era (post-1985) from the current rate of 3.2 per cent.
"We expect next week's labour market report will reinforce what's clear in survey data and anecdotes – finding workers is the primary constraint facing Kiwi businesses, and that difficulty only increased in the first half of 2022," said ANZ's Finn Robinson.
ANZ economists have pencilled in a pick of 2.8 per cent for unemployment, ASB has picked 3 per cent and Westpac 3.1 per cent. The Reserve Bank has also forecast 3.1 per cent.
However, they all warn that forecasting remains tricky in the current environment.
"Correctly picking quarterly movements in the HLFS remains more a case of luck rather than good judgment, with a fair degree of Omicron-related noise thrown into the mix. We still expect the metrics of this survey to depict an extremely stretched labour market," said Robinson.
The data is unlikely to hold much good news for businesses struggling with skills shortages and will suggest there is still considerable inflationary pressure in the domestic economy.
Jobs growth was expected to tick up from Omicron-induced weakness in the first quarter, said ASB senior economist Mark Smith.
"Modest employment growth is more due to a shortage of workers rather than the weaker demand for labour, with the second quarter Quarterly Survey of Business Opinion survey showing a record 37.2 per cent of firms reporting labour shortages as the major constraint on production."
The survey also showed a net 69 per cent reporting skilled and unskilled labour shortages
- also a record high.
This strongly suggested that New Zealand employment was well above its maximum
sustainable rate, he said.
That was bad news for the Reserve Bank, Robinson said.
"The tight labour market is turning into an increasingly intense headache for the RBNZ. The gaping chasm between labour demand and supply is likely to be a key driver of persistently too-high domestic inflation pressure over the next year.
"We expect ongoing 50bp hikes will bring the OCR to 4 per cent by year-end. That's consistent with market pricing, but a stronger-than-expected jobs report could see a market reaction nonetheless.
"Wage growth has been picking up over the last year, reflecting the tight jobs market," said Westpac chief economist Michael Gordon.
"For the Labour Cost Index [LCI], we're expecting a 0.9 per cent increase in the overall measure for the June quarter. This would lift annual growth to a 3.2 increase, the fastest pace since early 2009.
"June quarter movements tend to be on the higher side because of minimum wage increases, which take effect on 1 April.
"While this year's increase of 6 per cent was similar to last year's 5.8 per cent, each successive increase affects a greater share of the workforce, which in turn gives it a bigger influence on the average."
Other economists expect similar rises in labour costs although - as Robinson notes - these levels will still fall well short of the annual rate of consumer price inflation, at 7.3 per cent.
In the past year there has been some controversy about a perceived discrepancy between the official unemployment rate and the numbers on Jobseekers benefits.
The Stats NZ unemployment number is based on responses to the Household Labour Force survey (HLF).
Every quarter, Stats NZ surveys 15,000 households - catching data for more than 30,000 people - to get a representative sample of Kiwis' employment status.
It is worth reiterating that they are very different measures - although only the unemployment number provides us with a consistent measure that can be benchmarked back to 1986.
Westpac's Gordon notes that there was a further drop in the number of people receiving the JobSeeker benefit over the June quarter, although the rate of improvement is slowing.
"We should note that this measure provides at best a rough indication of the trends in HLFS unemployment. A recent paper from Stats NZ showed that there is a surprisingly small overlap between the two groups – only around a third of those officially unemployed are receiving the Jobseeker benefit, and vice versa."
For more on those differences see: How Unemployment is measured - Q&A