Slightly softer jobs report from New Zealand ahead of RBNZ rate decision

8:30 AM November 6, 2019


  • Unemployment rises slightly more than expected, the increase was almost fully offset by a rise in labour force participation
  • Employment growth meets expectations and keeps slowing down
  • Markets not confident the RBNZ to cut rates next week

Unemployment in the New Zealand’s economy grew to 4.2% during the three months through September, subtly exceeding economists’ expectations suggesting a rise to 4.2%. That means a noticeable pick-up from 3.9% seen in the second quarter, however, one needs to take into account that changes in New Zealand tend to be quite substantial from quarter to quarter due to the fact that the economy is relatively small. On the face of it, it could be treated like a bearish signal, albeit this increase was almost fully offset by a corresponding uptick in labour force participation, which the rate rose to 70.4% from 70.2%. 

On top of that, employment growth slowed to 0.9% YoY from 1.4% YoY, matching expectations. Looking at the underlying trend in employment one may notice that momentum keeps losing steam, though this downtrend has been moving in tandem with falling unemployment. Wage pressure in the private sector eased somewhat to 3.9% annually and average hourly earnings slowed to 0.6% from 1.1% quarterly, well below the expected value of 1%. Looking ahead, the RBNZ meets next week with quite high odds to see another rate reduction to a record low of 0.75%. However, this is not a done deal for sure, as chances are hovering at around 68% this morning. Moreover, it needs to take into consideration that the RBNZ has cut rates three times this year, wage pressure remains quite elevated and business confidence improved. Thus, it seems that it’s all about risks localized abroad.

A scorecard of the New Zealand’s labour market. Source: Bloomberg


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