Part time job surge fuels employment, drags down pay rate

2.00pm

Private sector workers got less in their pocket during the May quarter, with total hourly earnings dropping by an average 0.1 per cent.

The drop was unexpected with economists forecasting a slight rise of 0.8 per cent.

Releasing its Quarterly Employment Survey today, Statistics New Zealand said total average hourly earnings in both private and public sectors dropped 0.3 per cent, which the department said was not statistically significant. Public sector earnings dropped 1.3 per cent during the quarter.

It was the first decline since November 1999, mostly due to an increase in part-time workers whose lower earnings dragged the average down.

On an annual basis, however, hourly earnings rose 2.4 per cent for the year to May, against market expectations of 2.6 per cent. Private sector hourly rates increased by 1.4 per cent and public sector by 5 per cent in the year to May.

The surge in part-time employment meant employment was also up. It rose by 0.9 per cent, with part time jobs rising by 5.5 per cent. Full-time equivalent employees (FTEs), a term which uses full and part time employment to smooth out variations, rose by 1.7 per cent.

Another measure of employment, filled jobs, rose by 2.1 per cent during the May quarter and by 4.4 per cent on a year ago, largely due to seasonal growth in construction and education.

While influential, the QES is not the main measure of employment -- that is the Household Labour Force survey, due out on Thursday.

The QES surveys businesses and factors in composition of the workforce, but excludes certain industries such as agriculture.

The Household Labour Force interviews households and factors in unemployment and whether people have more than one jobs.

Conversely, even though earnings dropped for the quarter, another survey showed labour costs had risen.

The department's quarterly Labour Cost Index (LCI) showed salary and wage rates during the June quarter rose by a modest 0.5 per cent.

The rise followed similar increases in the previous two quarters, and increased on an annual basis by 2.1 per cent.

Analysts had tipped the LCI to rise by 0.6 per cent for the quarter and 2.3 per cent for the year.

Economists say the unexpected fall in wages will allow the central bank to keep interest rates unchanged as the world market for exports slows and farm incomes fall, crimping consumer spending.

"Interest rates are on hold for the rest of the cycle and this will make the central bank more comfortable with that stance," said Ulf Schoefisch, chief economist at Deutsche Bank AG in Auckland.

"The economy is now slowing and this will add to that because lower incomes will flow through to weaker household spending."

The Reserve Bank of New Zealand makes its next monetary policy statment on August 14, when it will decide whether to raise the base interest rate from its current 5.75 per cent.

Economists are divided as to whether inflationary pressures are high enough to warrant another increase.

- NZPA