Stalled job growth tipped to keep interest rate rises on hold

Employment growth stalled in the March quarter, making it more likely the Reserve Bank will leave interest rates on hold next month, economists say.

They were responding to Statistics New Zealand data yesterday showing the number of people employed rose by only 1000 in the quarter, seasonally adjusted.

The number of full-time jobs rose 0.8 per cent, to be 3.5 per cent higher than a year ago, but that was largely offset by a fall in part-time employment. Male employment fell 0.3 per cent, while female employment rose 0.4 per cent.

With the labour force increasing by 7000, the net effect was to push the unemployment rate up to 3.9 per cent, from 3.6 per cent three months ago.

It is still the second lowest in the OECD after Korea and compares with 5.1 per cent across the Tasman.

The results were weaker than the financial markets had expected and they responded by dialling back their estimate of the chances of another official cash rate rise on June 9 to 20 per cent from 40 per cent before the figures came out.

Deutsche Bank economist Darren Gibbs said the higher unemployment rate, taken at face value, implied more slack in the labour market and, therefore, less upward pressure on wages. He said coming on top of weaker-than-expected wages data last week, marked declines in business and consumer confidence and mixed data on the global economy, it should be sufficient to stay the Reserve Bank's hand.

ANZ National economists see the figures as further confirmation the economy has turned the corner.

They said to some extent the flattening of employment growth could be due to the difficulty of finding labour and reflect the fact that it followed a "supercharged" 1.6 per cent increase in the December quarter, "but it is difficult to ignore today's data as not showing signs of easing demand growth within the economy".

The number of newspaper job advertisements increased 3.9 per cent last month, reversing a 3.7 per cent decline in March. "But that is still 1.3 per cent lower than this time last year, pointing to some moderation in demand," ANZ economist Lauren Rosborough said.

But Bank of New Zealand economist Craig Ebert said: "The chorus we hear directly from the business sector is still clearly one of extreme staffing scarcity."

Just under 90,000 people count as officially unemployed, which means they want a job, are actively seeking one and available to start work.

Taking the wider definition of "jobless" which includes those who are available but not actively seeking work, or seeking it but not immediately able to start work, the figure expands to 161,000.