KEY POINTS:
Employment surged in the first three months of the year - fresh evidence an economic upswing is under way - while the unemployment rate at 3.8 per cent indicates the labour market remains very tight.
The economy had shed jobs in the second half of last year but added 25,000 in the March quarter, an increase of 1.2 per cent, even if four out of five of the new jobs were part-time.
In seasonally adjusted numbers, the labour force grew by 26,000 in the quarter, half of which was a rise in the working-age population and other half representing a rise in the participation rate - the proportion of people of working age either working or available to work and actively seeking it.
The participation rate, which fell in the second half of last year, jumped 0.6 percentage points to 68.6 per cent, the second highest it has ever been.
Most of the increase in labour force participation was women.
ANZ National Bank chief economist Cameron Bagrie said the rebound in employment was consistent with what firms had been saying about their hiring intentions in the business sentiment surveys.
"The fact that most of the employment growth came from part-timers should not be over-played," he said.
"Firms have been reporting increasing difficulty in finding labour in recent quarters and perhaps part-timers were all they could find."
The unemployed total rose by 1000, enough to nudge the rate from 3.7 to 3.8 per cent. It has been in the 3.6 to 4 per cent range for the past three years.
First NZ Capital economist Jason Wong said the unemployment rate's remarkable stability despite two years of sub-trend economic growth reflected a significant degree of labour hoarding by firms.
"It's a rational move in a tight market but it has been responsible for poor productivity growth."
And the labour hoarding suggested employment growth would recover more slowly than usual during the economic upturn, he said.
Over the year ended March 30, employment rose 1.7 per cent, an average of just 0.4 per cent a quarter.
"While this is a relatively low pace of expansion compared with the last few years it is nonetheless about as fast as the economy can withstand given the paucity of supply," said BNZ economist Mark Walton. "If this pace of expansion continues - and employment intentions suggests it will for a while yet - the unemployment rate will not edge up to the non-inflationary levels the Reserve Bank so desperately desires for some time yet."
But Council of Trade Unions president Ross Wilson said bank economists should stop saying low unemployment was bad news and look in the mirror. "Low unemployment and modest wage increases are not driving inflation. In fact inflation is at 2.5 per cent and falling, even though there are some medium-term pressures.
"In a tight housing market ... we get very high [house] price rises - a 38.5 per cent rise between 2004 and 2006 - but in a tight labour market, we have been getting only modest wage increases." Wilson said the banks were borrowing huge sums offshore, helping to fuel house-price inflation.
Looking up
* Employment up 25,000 or 1.2 per cent in the March quarter.
* Unemployment rate 3.8 per cent from 3.7 per cent in December.
* Participation rate 68.6 per cent from 68 per cent in December.
