New Zealand unemployment unchanged in March quarter

New Zealand's unemployment rate was steady in the March quarter as the labour market remains tight.

Statistics NZ said the number of people out of work remained at 102,000 (3.4 percent). Most analysts had expected the figure to either remain steady or rise slightly.

"Unemployment and underutilisation rates, as measured by the household labour force survey, have been sitting at or near record lows for more than a year," said Stats NZ work and wellbeing statistics senior manager Becky Collett. "The underutilisation rate - a broad measure of spare labour capacity that includes those unemployed, underemployed and in the potential labour force - decreased to 9 percent from 9.3 percent last quarter."

Compared to the same quarter last year, unemployment was up by 0.2 percent.

There are warnings the unemployment rate would soon tick higher, judging by "the demand for labour and hiring set to weaken", according to ASB.

"Adding to this will be increasing labour supply. Growth in the working age population (and labour force) is also expected to strengthen by the end of the year given the strong pick-up in net immigration to NZ," ASB senior economist Mark Smith said in a note.

These factors would push up unemployment to about 5.5 percent by the end of next year, he said.

"Wage growth is expected to decline next year as labour market capacity picks up and workers compete for less plentiful work."

According to economic projections of the Treasury, published late last year, employment was expected to shrink this year and next before rising again in 2025.

Treasury expected an unemployment rate of 3.8 percent this year and 5.5 percent in 2024,  following a low of 3.3 percent last year.

Payroll concept image of a pen, calculator and reading glasses on financial documents.
Photo credit: iStock

Wage inflation at record-highs

Yearly wage growth sped up to record-highs again in March but "were not as chunky as expected", ASB said.

Average hourly earnings rose 1 percent quarter-on-quarter in March. That raised the yearly increase in wages, the labour cost index (LCI), to a seasonally adjusted 4.3 percent.

"Looking at the unadjusted LCI... wage inflation for the private sector rose 1.4 percent qoq, with the annual rate stable at 6.1 percent in the March 2023 year," said Smith, noting that increase was below the annual inflation rate - which dropped to 6.7 percent late last month.

Looking ahead, ASB expected a quarter-percentage-point rate (OCR) hike after the Reserve Bank's May 24 monetary policy meeting.

"More downside risks are emerging but the OCR will not be cut until the RBNZ is confident there is sufficient slack in the labour market that will see CPI inflation settle in the 1-3 percent target range," Smith said.