Wage growth remained strongest in the public sector, according to figures released by Stats NZ today.
But almost half the annual growth in unemployment and under-utilisation came from young people.
Economists had expected a rise in the official unemployment rate, with most picking it to land at 4.7%.
Over the past year, unemployment rose by 33,000 to 143,000.
“Unemployment has been increasing since 2022, leaving the current quarter’s unemployment rate the highest since March 2021,” Stats NZ labour market manager Deb Brunning said today.
”Recent rises in unemployment align with other economic indicators, including an increasing number of benefit recipients, a decreasing number of job vacancies, and declining GDP (gross domestic product) per capita.”
Annually, unemployment for people aged 15-24 years rose 14,400 and under-utilisation rose by 29,300, not seasonally adjusted.
In April, May and June this year, compared with the June 2023 quarter, unemployment rates for people aged 15-19 were 20.7%, up from 15.1%.
And for those aged 20-24, it was 8%, up from 5.8% a year earlier.
Wages rise
Wages kept rising, up 4.3% in the year to June 30, and up 1.2% compared to the March quarter.
For comparison, the Consumers Price Index rose 0.4% quarter-on-quarter and 3.3% in the year to June 30.
Average weekly earnings (including overtime) for full-time equivalent employees (FTEs) increased to $1,612.
Average ordinary time hourly earnings increased to $41.52, Stats NZ said.
Labour cost index wage inflation in the public sector rose to a series high of 6.9% annually.
And public sector average ordinary time hourly earnings in the Quarterly Employment Survey (QES) increased 7.9% to $49.56.
“The effects of pay increases for some health workers, along with school therapists and early-childhood education staff, have all come through in public sector wage growth this quarter, in addition to other settlements seen over the year,” Brunning said.
Market reacts
The New Zealand dollar rallied by just under half a US cent on the news.
And wholesale interest rate markets are expected to tone down expectations of an August 14 rate cut from the Reserve Bank.
”The number was not as bad as was feared,” Westpac market strategist Imre Speizer said.
”Unemployment rose, but by less than was expected,” he said.
”That means that interest rates, which had been pricing in an August rate cut, now have to rise to undo some of that rate-cut pricing,” he said.
”It indicates the economy is not as bad as feared, which is positive for the Kiwi,” he said.
The Kiwi traded up to US59.92c from US59.53c just before the job market data release.
Rate cuts ahead?
Today’s labour market news is the last major data set before the Reserve Bank makes its August interest rate call next Wednesday.
“The sharp drop-off in job advertising, extremely weak business sentiment, and gloomy headlines suggest ... employment levels will contract for the second consecutive quarter,” ASB senior economist Mark Smith said earlier today.
“The labour market is clearly softening, with higher-frequency indicators pointing to outright job losses in recent months,” Westpac senior economist Michael Gordon said ahead of the Stats NZ release.
“However, the slowdown doesn’t appear to be outside the bounds of what the Reserve Bank was looking for.”
A range of indicators showed the labour shortages that plagued employers in previous years were now a distant memory, he said.
“That’s due to a combination of a surge of migrant workers to fill the gaps once the border was reopened, and a drop in demand for new workers as the economy has cooled off.
“Job advertisements are now below pre-Covid levels, businesses report that labour is no longer hard to find, and our Employment Confidence Index shows that households are finding job opportunities much harder to come by.”
Despite that downturn, there was little likelihood that the data would be bad enough to justify market expectations for rate cuts in August, economists said.
“This is the last big piece of data ahead of the August MPS, where the market is currently pricing more than a 65% chance of a cut,” ANZ chief economist Sharon Zollner said.
“We certainly agree that the Q2 labour market data will be important for the RBNZ’s calibrations, but if the details are close to our (and the RBNZ’s) expectations, we don’t think it’s a smoking gun for the imminent rates cut that the market is putting relatively high odds on.
“All that said, should recent weakness in the broad range of forward indicators persist over coming months, that, combined with confirmation from the Q2 labour market data that momentum is indeed softening, would see the odds of the cutting cycle kicking off as early as October increase,” Zollner added.
“But for now, given what we’ve seen so far, we think November remains the likeliest timing for the beginning of the cutting cycle.”
Additional reporting by Jamie Gray.
Liam Dann is Business Editor at Large for the New Zealand Herald. He is a senior writer and columnist, as well as presenting and producing videos and podcasts. He joined the Herald in 2003.
