Analysts calm on jobless rate rise

By BRIAN FALLOW economics editor

Analysts are playing down an unexpected rise to 4.6 per cent in the unemployment rate in the last three months of 2003.

The number of people employed rose 28,000 compared with September, but adjusted for seasonal effects the increase was only 1000 or 0.1 per cent, Statistics New Zealand said.

That is a marked slowdown from seasonally adjusted rises of 25,000 in the September quarter and 18,000 in the June quarter.

On an annual basis, employment growth eased to 2.7 per cent, from 3.3 per cent three months ago.

The unemployment rate increased from 4.4 per cent, a 16-year low, to 4.6 per cent.

The weaker jobs growth in yesterday's household labour force survey probably represented a breather after the exceptional strength of the two previous quarters, economists said.

It masked a switch from part-time to full-time employment. Full-time employment grew 0.5 per cent (7000 people) while part-time employment fell 1.4 per cent (6000 people).

"If someone shifts from part-time to full-time employment it does not register as an increase in employment in the HLFS, though it does reflect a tight labour market," ANZ chief economist David Drage said.

ANZ's tally of newspaper job advertisements recorded an 8.1 per cent fall last month, seasonally adjusted, but that only partly retraced the 19.3 per cent surge in December as employers continued to advertise late in the year, especially in Auckland.

"Despite recording a fall in January, job advertising levels in the major newspapers remain at the second highest level in the 10-year history of the series," Drage said.

Westpac economist Nick Tuffley said a pullback in employment growth from its recent unsustainable pace was inevitable. He expects a further slowing to an annual rate of 1.7 per cent by the end of the year as the economy loses momentum.

But the unemployment rate was likely to remain below 5 per cent because the labour supply would decline as the net migrant inflow shrank.

Despite the weaker than expected employment growth and a 3 per cent rise in the exchange rate since the Reserve Bank reviewed interest rates last month, most market economists still expect the bank to raise rates again on March 11.

"However, in the absence of significant downward correction in the exchange rate the odds are growing that the Reserve Bank will signal that this may be the last tightening for some time," Deutsche Bank economist Darren Gibbs said.