Shock unemployment figure may keep rates low

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Thu, 04 Feb 2010 11:07a.m.

Full-time employment drove the latest decrease in employment

Full-time employment drove the latest decrease in employment

A shock spike in New Zealand's unemployment rate to 7.3 percent pushed the New Zealand dollar down and caused economists to back off predictions of interest rate hikes. The rate for the December quarter released by Statistics New Zealand is up from 6.5 percent in the September quarter and is higher than the 6.8 percent economists were calling.

"Importantly, the RBNZ was looking for an unemployment rate of just 6.6 percent and a peak of only 6.7 percent. Clearly this prediction has been blown out of the water," BNZ economists said.

Yet BNZ said the data was consistent with a recovering economy. A net 2000 people lost their jobs in the December quarter compared to an average of 17,000 a quarter over the previous nine months.

An unexpected rise in the labour force participation rate helped boost the number of job seekers. The labour force participation rate increased by 0.1 percentage points to 68.1 percent during the latest quarter.

Strong migration flows were bolstering the number of people in the labour force and the participation rate was high for a recession, BNZ said.

The New Zealand dollar fell more than a US cent to US69.65c and interest rates fell on wholesale money markets, which feed into mortgage rates. A hike in the official cash rate in April was a maybe before the data but there was little chance of it after it.

"The weakness in today's data raises the real possibility that the RBNZ waits beyond June to begin the tightening cycle," said Philip Borkin, economist at Goldman Sachs JBWere.

The increase in unemployment was particularly marked among youth, with the unemployment rate for 15 to 24 year olds rising 6.4 percentage points to reach 18.4 percent.

The differences among ethnic groups was stark. The unemployment rate for Maori is 15.4 percent, for Pacific people it is 14 percent, while just 4.6 percent of the European ethnic group were unemployed.

The Household Labour Force Survey showed those people officially without jobs jumped 18,000 to 168,000. This was double the Labour Department forecast of a 9000 increase. Deutsche Bank said employment was essentially stable in the fourth quarter.

The number of people with jobs dropped by 2000 or 0.1 percent during the latest quarter, compared with a 16,000 decline in the previous quarter.

ASB said the variables which go into the unemployment rate calculation, combined with seasonal factors could lead to surprises in the headline unemployment rate.

"It is important to highlight the stabilisation in the number of people working. A total of 2.152 million people are employed in New Zealand - only 2000 less than in the previous quarter. 

"The next step is for the economy to start creating jobs, and we expect this to start to happen over the course of 2010."

 NZPA

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Comments

05 Feb 2010 10:52a.m.

Jim wrote:

Yeh aron, where do you work? and Gary go create some more Govt Depts!!!

04 Feb 2010 08:58p.m.

Alien wrote:

Dany, just since you obviously cannot read I will let you in on a secret you would know if you read the article. The increase in the unemployment isn't from people losing their jobs, it is from new people entering the job market, ie, students who finished their education last year and are now looking for a job.

04 Feb 2010 06:46p.m.

Dany wrote:

ye...scary lots of people loosing job,but you did not ever hear that anyone from WCC lost their job,.they earning huge sallary but no one lost job in the WCC they have also chance to get up with their wages,etc,if you look how many people working in just library.......and NO one lost the job ever in WCC thanks to city mayor,............

04 Feb 2010 02:46p.m.

aron wrote:

Can anyone please tell me what action ever came out of John Keys job summit last year ?

04 Feb 2010 02:15p.m.

Peter wrote:

The National led Government MUST take the lion's share of the blame. If only they had taken the sort of action taken by the Australian (Labor) Government (economic stimulus in the form of sending all taxxpayers some money and also in terms of temporary extra infrastructure spending), NZ would not be in such a parlous state. For the first time in years unemployment in Australia is significantly lower than NZ (5.8% and NOT rising). The NATS must be voted out at the next election.

04 Feb 2010 01:27p.m.

Alien wrote:

Jo, the high dollar will be something we have to get used to. We will go dollar for dollar with the greenback, and we will even go above the dollar mark as the greenback is going to collapse much further.

04 Feb 2010 12:39p.m.

Alien wrote:

what government is in power is not relevant. We are coming out of the worst recession, globally since the great depression. No matter what government was in power right now we would still have a higher than normal unemployment rate, which has increased recently not by people being made unemployed but by new people entering the job market. While people are quick to blame Labour or National, you need to look at the global situation and realise that no matter who was government this would still be happening, and at the end of the day we are still better off due to this government and the past government than other places. Cities in the US are reporting an official unemployment of 15% unofficially of around 20%, it is made lower there by the way they changed how the official unemployment rate is taken. Because of this government and because of the past government we are riding out this global storm rather well.

04 Feb 2010 12:35p.m.

aron wrote:

Yea Gary i never thought of that, am starting to wonder that national like unemployment high so business can keep wages low.

04 Feb 2010 12:14p.m.

Jo wrote:

If we continue to have a high dollar against the US$ we will have high unemployment in tourism, retail,farming etc and the flow on effect from these industries.Just look at the state of our economy in 2001-2002 when our dollar was much lower than it is today,far better & a lower balance of payments, better tourism numbers, better preforming rural sector, lets expose these money shufflers buying and selling money and show NZ the devastating effect they have on our nation.

04 Feb 2010 12:03p.m.

Gary wrote:

It's worth noting that in 1999 that National was also in government.