Staying off the "hedonic treadmill" can help build up financial independence and reserves ahead of a resignation or big career change.
Staying off the "hedonic treadmill" can help build up financial independence and reserves ahead of a resignation or big career change.
New data released on Wednesday is expected to show inflationary pressure stemming from the labour market has run its course, with spare capacity increasing and wage growth moderating, says ANZ economist Henry Russell.
That’s the good news. The bad news is that translates to a rise in unemployment - to4.3 per cent (from 3.9 per cent) - by ANZ estimate.
There’s a consensus among economists that the labour market data for the December quarter will show a rise in unemployment despite ongoing employment growth.
ASB is also picking unemployment to land at 4.3 per cent.
“The unemployment rate is expected to hit its highest level since mid-2021 and is on track to approach 5.5 per cent by the end of this year,” said ASB economist Mark Smith.
“Annual labour cost growth is expected to fall and should cool over 2024 given increased competition for jobs, lower increases in the minimum wage and less compensation for (easing) inflation.”
Kiwibank and Westpac are both picking 4.2 per cent.
That was still a low level compared with history, said Westpac senior economist Michael Gordon. But it was now heading into what he describes as the “not too hot, not too cold” range.
“While employment is no longer directly in the RBNZ’s mandate, it’s a useful guide to how hot the economy is running, and in turn the extent of future inflation pressures,” Gordon said.
The labour surveys were the last major data release ahead of the Reserve Bank’s monetary policy sat the end of this month, he noted.
“Our estimates are mostly in line with the RBNZ’s previous forecasts from November. So if the results pan out as expected, the RBNZ will most likely stick with its recent messaging: We’re making progress on taming inflation, but there’s still a long way to go, and the greater risk is in taking their foot off the brakes prematurely.”
While the economy has undoubtedly slowed it likely continues to create jobs. But record net migration was creating the excess capacity.
“While moderating labour demand as the economy slows has played a role, the ongoing surge in labour supply continues to be the key driver,” Russell said.
“Record net migration inflows have resolved reported labour constraints.”
Kiwibank economist Mary Jo Vergara: "A lot of the inflation we're seeing now, specifically the domestic side, stems from the housing market ." Photo / Fiona Goodall
ANZ expects that employment will have expanded 0.2 per cent (quarter on quarter). That was modest growth but much firmer than its previous forecast of -0.2 per cent.
“Broadly speaking, labour demand is breaking down,” said Kiwibank senior economist Mary Jo Vergara.
“Firms simply don’t need workers with the same desperation as years past. According to Mbie [Ministry of Business, Innovation and Employment] data, the number of job vacancies advertised online declined around 7.5 per cent over the quarter, and over 25 per cent from last year’s levels. "
There were clear signs that the RBNZ’s “heavy-handed” hikes were inhibiting household demand and hurting business, she said.
“If firms expect to pump out less output, then an extra pair of hands may prove too costly. We expect employment growth to weaken further in the coming quarters.”
On the wage front, Westpac is picking a 0.8 per cent rise in the overall Labour Cost Index (LCI) for the December quarter.
“On an annual basis, wage inflation has just passed its peak, and we expect it to slow further from 4.2 per cent to 3.9 per cent,” said Gordon.
“The turning point in wage inflation has been more obvious in the private sector; there was a sharp lift for the public sector in the September quarter due to some large wage agreements taking effect, but that won’t be repeated this time.”
While the headline unemployment rate would command all the fanfare, the measures of pay growth would be just as important for the RBNZ because a slowdown in wage growth was needed to successfully tame domestic inflation, said Kiwibank’s Vergara.
“The downtrend in the private sector Labour Cost Index – a measure of pure wage growth – likely continued in December.”
Kiwibank and Westpac economists were both picking 4.2 per cent.
