The labor market remains strong, unemployment is near record lows and wages are rising at a record pace, but there are signs that a turnaround may be on the way.
Stats NZ reported that unemployment rose to 3.4 percent, but with moderate job growth and an increase in slack in the market.
Private sector wages, measured by the labor cost index, rose 4.3 percent for the year to December, while another measure using the hourly wage rate was in line with inflation, rising 7.2 percent.
Stats NZ chief executive Becky Collett said: “The unemployment rate… has remained at or near historical lows since the September 2021 quarter.
About 4,000 jobs were added in the December quarter, while the lean employment rate, which measures people looking for or willing to work more, rose to 9.4 percent from 9 percent in the previous quarter as the labor force expanded.
The participation rate, the proportion of working-age people in the labor force, has been held at a record level.
The record level of wage growth showed that many households are at least keeping pace with, and in some cases ahead of, inflation.
Finding and retaining employees has been a major complaint for businesses over the past two years, with rising wage costs partly driving the strength and continuing cost pressures.
However, recent surveys show that businesses are starting to cut back on hiring and in some cases, such as retail chain The Warehouse, jobs are being cut due to sluggish demand and sales, and the number of jobs being advertised has also fallen.
The easing of visa rules is also seeing more workers enter key sectors, and the country has begun to absorb migrants after the toll from the pandemic.
Prime Minister Chris Hipkins said of the latest data in Auckland this morning: “The overall labor force – the overall number of people available for work – has increased.
“Actually there are 4,000 more people working, 4,000 more unemployed in the latest figures, but that’s indicative of the fact that the total number of available workers has increased.”
Michael Gordon, Westpac’s chief economist, said the data showed the labor market was still weak, but probably close to peaking.
“The labor market remains tight and wage growth continues to pick up, but there is good reason to expect a turnaround later this year as higher interest rates ease.”
The labor market is usually one of the last sectors of the economy to slow down.
Gordon said the figures were lower than the central bank’s forecasts last November, which added to last week’s lower inflation numbers.
“Today’s results may have been softer than the RBNZ expected for the quarter, but right in line with their broader view – at most you could argue that the labor market has reached an inflection point three months earlier than thought.”
He said the RBNZ could be expected to raise its official cash rate later this month, but by 50 basis points to 4.75%, up from 75 basis points last November.
That means higher interest rates, Kerr said.