New Zealand's unemployment rate rises to 4 percent

New Zealand's unemployment rate has slightly increased in the December quarter, official data shows.

Stats NZ released its labour market update for the December 2023 quarter on Wednesday which found the unemployment rate was 4 percent, up from 3.9 percent in the third quarter of 2023.

The seasonally adjusted number of unemployed people rose to 122,000, up 3000 from the previous quarter.

This was slightly lower than the market's prediction which estimated unemployment would rise to 4.3 percent. 

"Unemployment rates have returned to 2019 levels, following recent historic lows," work and wellbeing statistics senior manager Becky Collett said. 

"Low unemployment formed part of the unique economic period from 2021 to 2022, as restricted borders limited increases to labour supply and labour demand remained high." 

The unemployment rate dropped to 3.2 percent in the December quarter, 2021, remaining relatively consistent until 2023. 

Underutilisation, a broad measure of spare capacity in the labour market, also increased to 10.7 percent in the December quarter. This compared with 10.4 percent in the previous quarter and 9.3 percent in the December 2022 quarter. 

While the unemployment rise was less than economists were predicting, a business group suspects the picture is actually worse than the statistics show.

"These numbers are from the last three months of 2023. We know anecdotally that the economic situation has further deteriorated, and the real unemployment rate today is likely to be higher," Employers and Manufacturers Association (EMA) Head of Advocacy Alan McDonald said.

"The numbers released today don't feel right."

McDonald said the business association is increasingly hearing from its members that the economic environment is becoming more difficult, with their advice line seeing calls for restructuring and redundancy support surge by nearly 90 percent compared with this time last year.

He said increasing costs and rising interest rates are not only impacting consumer discretionary spending but also increasing business financing costs, causing companies to look at their staffing as a way to cut costs.

McDonald said while inflation is beginning to fall, business conditions are likely to remain difficult for some time given interest rates are expected to remain elevated for much of the year.

"What business needs most now is the new government to have a laser focus on the economy, focusing on policy that brings inflation down faster and advancing policy that rebuilds both business and consumer confidence," he said.

"After all, when business is doing well, the economy does well and that means more tax revenue for government to fund critical social services."

Large increase in public sector wages 

New Zealand's average ordinary-time hourly earnings increased 6.9 percent in the year to the December 2023 quarter, Stats NZ found. 

This wage growth has outstripped inflation which currently sits at 4.7 percent.

Public sector ordinary-time hourly earnings increased 7.4 percent annually in the December 2023 quarter, the largest annual increase since the March 2006 quarter. 

"Annual growth in private sector wages was 6.6 percent this year, down from the recent peak of 8.6 percent in the year to the September 2022 quarter," business employment indicators manager Sue Chapman said. 

In the labour cost index (LCI), all salary and wage rates (including overtime) for the public sector increased 5.7 percent annually, the highest rate since the LCI series began. 

"Recent growth in public sector earnings follows a period of pay restraint between April 2020 and March 2023 as a response to the impact of COVID-19," Chapman said. 

Education and health wage increases largely fuelled the rise as both industries had pay agreements that came into effect late in the year. 

Average total hourly earnings in the education and training industry rose 14 percent annually to $43.72, and the health care and social assistance industry rose 10 percent to $43.59. 

Together, the education and health industries account for over half of all public sector employees.