Record jobs growth lowers unemployment

A record number of 22,000 new jobs created in the June quarter sent the unemployment rate down to the equal lowest level since the mid-1980s, Statistics New Zealand (SNZ) said today.

The unemployment rate fell from 3.9 per cent in the March quarter to 3.6 per cent, equal to its level in the December 2005 quarter and in the June quarter last year, which were the lowest since the department began its Household Labour Force Survey in March 1985.

Employment grew by a record 1.0 per cent in the quarter to 2.13 million. Economists were expecting employment to be flat.

The unexpected continued expansion of the jobs market means the Reserve Bank could return to its tightening cycle, or may decide to hold off cutting interest rates until late into next year to try and squeeze inflation out of the economy.

The job participation rate rose to a record 68.8 per cent from 68.5 per cent in the March quarter.

The jobs growth was wholly due to an increase in full-time employment of 1.5 per cent, SNZ said.

Part-time employment dropped by 0.8 per cent. There were a net 25,000 full-time jobs created during the quarter

Both male and female employment increased -- by 0.7 and 1.2 per cent respectively.

There was a sharp drop in the unemployment rate for Maori and Pacific Island people.

The Maori rate fell to 8.2 per cent from 8.7 in the March quarter, while the Pacific rate fell to 5.9 per cent from 7.6 per cent. The pakeha rate dropped to a 2.4 per cent from 3.2 per cent.

The total number of unemployed fell to 79,000 from 86,000 in the March quarter, but was still 1000 more than a year ago.

The Tasman/Nelson/Marlborough/West Coast region had the lowest unemployment rate at 2.2 per cent (down from 4.2), followed by Taranaki, where the rate fell from 4.7 per cent to 2.4 per cent.

Wellington recorded the highest unemployment rate -- static on 5.8 per cent.

The unemployment rate in Auckland fell to 3.1 per cent from 3.9 per cent.

SNZ's Richard Cottam said the work force grew by 0.7 per cent (14,000) in the quarter to 2.21 million while 5000 moved out of the labour force.

New Zealand's unemployment rate is the second lowest in OECD club of rich nations behind South Korea's 3.4 per cent rate.

ANZ Bank economist Khoon Goh told NZPA that despite data showing the economy was running much stronger than the Reserve Bank had anticipated, the bank was not likely to hike interest rates again. However, it could delay the start of easing cycle.

The economy was "clearly a lot strong that what they would have expected"

Mr Goh said it would interesting to see how the jobs market strength would translate in wages pressure. It showed wage inflation pressure had not yet peaked.

Today's figures would also provide support for the housing market.

"These things will clearly make the Reserve Bank feel a bit uncomfortable," Mr Goh said.

He said the bank was placing faith in the monetary policy framework -- that the pipeline effects of previous rate rises would eventually contain inflation.

Mr Goh said the figures showed there was clearly strong demand for labour despite the economy slowing. Most of the strength in demand came from construction, education and health.

"Those are the sectors of the economy that are going gangbusters."

- NZPA