The job market deteriorated in the June quarter, with unemployment rising to 4.6%.
That’s up from the 4.3% rate in the March quarter and in line with the Reserve Bank of New Zealand’s forecast of 4.6%.
It is the last major data set before the Reserve Bank makes its August interest rate call next Wednesday.
Economists had expected a rise in the official unemployment rate, with most picking it to land at 4.7%.
“The sharp drop-off in job advertising, extremely weak business sentiment, and gloomy headlines suggest that [Household Labour Force Survey] employment levels will contract for the second consecutive quarter,” ASB senior economist Mark Smith said.
“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.”
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.
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