Unemployment drops to 6.4pc, dollar jumps

Unemployment numbers just released show New Zealand's jobless rate has fallen from 6.9 per cent to 6.4 per cent - better than many were expecting.

Market economists expected today's release of the Household Labour Force Survey to show the labour market improving, but only enough to trim the unemployment rate from 6.8 to 6.7 per cent.

The June quarter unemployment rate has been revised up to 6.9 per cent from the 6.8 per cent originally published.

The kiwi dollar jumped as much as 1.1 per cent immediately after the announcement, and recently traded at 78.63 US cents, the highest since April 2008.

ASB economist Jane Turner said today's survey results were encouraging.

She said that both employment growth and unemployment rate suggested the economy has performed better than expected over the third quarter of this year.

"However, to some degree today's results were likely to be somewhat discounted by both the market and the Reserve Bank, given the unusual amount of volatility in the survey over the past year."

Turner said that earlier this year, confidence in the economic recovery was buoyed by a surprising drop in unemployment, only to be reversed the following quarter.

"Overall, the continued improvement in labour market will start to feed through to stronger wage growth over the next year, and will underpin a recovery in consumer confidence."

The unemployment rate, while lower than market expectations, was still higher than the Reserve Bank's optimistic forecast of 6.2 per cent, said Turner.

"Nonetheless, the general improvement in employment growth is likely to have been close to the Reserve Bank's broader expectations for the economy in Q3."

ANZ chief economist Cameron Bagrie said volatility within the household survey in recent quarters meant there was a need to be "pretty coy" about placing too much weight on today's figures.

Despite that, he also said that behind the scenes the numbers looked reasonably robust across the board.

Goldman Sachs economist Philip Borkin said there was a big uncertainty as to whether the survey was a true representation of the labour market.

If it was, it would suggest the economy had turned, which boded well for 2011.

Council of Trade Unions secretary Peter Conway said today's unemployment figures were "a welcome step in the right direction but the improvement is neither fast enough nor substantial enough".

There were 243,500 jobless people in New Zealand including 150,000 officially unemployed, said Conway. There were also 110,000 part-time workers who would like to work more hours.

"We know that the labour marker lags in any recovery. The problem is we don't even know if there is a recovery, let along how long the lag will be in terms of jobs."

"Even worse," he said, "is the number of people who get left behind. The number of long term unemployed has increased by 8.1 per cent in the last year."

Conway said that "the daily dose of economic commentary, mainly provided by bank economists, unwittingly puts inflation issues ahead of jobs and wages every time."

"What this amounts to is that many economists are arguing daily about the risks of unemployment falling and wages rising."

"Of course inflation is important - it impacts on the real wage after all. But to consistently put inflation concerns ahead of jobs and wages is skewing the economic debate and it is time we had a new approach."

Statistics NZ said this quarter's decrease in the unemployment rate marked "a divergence in labour market outcomes for males and females."

Female unemployment increased during the quarter, with the female unemployment rate rising to 7.2 per cent, from 6.8 per cent in the previous quarter.

On the other hand, the male unemployment rate fell to 5.7 per cent during the September 2010 quarter, from 6.9 per cent in the June 2010 quarter.

While employment rose for males (by 21,000) and females (by 1,000) in the latest quarter, the number of unemployed males fell by 15,000 and the number of unemployed females rose by 5,000.

Total employment rose by 23,000 in the September 2010 quarter, with increases in both full-time and part-time employment.

Actual hours worked per week increased by 0.8 per cent, consistent with the rise in employment. During the quarter, the labour force participation rate increased by 0.2 percentage points to 68.3 per cent.


-HERALD ONLINE / BUSINESSDESK/ NZPA