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New Zealand employment jump lifts case for further RBNZ tightening

Employment rose 0.5% quarter over quarter and the Labour Cost Index accelerated to 0.7%, even as unemployment increased to 5.6%.

Reported · Written up by our desk · Central Banks

New Zealand’s labor market came in stronger than expected in the second quarter, with employment rising 0.5% quarter over quarter versus expectations for 0.1% growth, according to Action Forex.

While the unemployment rate climbed to 5.6% from 5.3%, the report also showed labor force participation increasing to 70.7% and the number of people employed up 1.2% year over year, suggesting the higher unemployment reflected a larger labor supply rather than collapsing demand for workers.

Wage inflation signals also stayed firm, with the Labour Cost Index accelerating to 0.7% quarter over quarter from 0.5%, and private-sector wage growth remaining at 0.7% quarter over quarter, reinforcing concerns about sticky domestic price pressures.

For the Reserve Bank of New Zealand, Action Forex said the data are likely to support maintaining a tightening bias rather than rushing to accelerate policy, noting that slack is beginning to emerge as the underutilisation rate rose to 13.8% and hours worked edged lower.

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