NZ Labour Market Preview: Stable, but not immune to risks - ANZ

Liz Kendall, Senior Economist at ANZ, suggests that the New Zealand’s unemployment rate is expected to have been unchanged at 4.5% in Q3, consistent with continued tightness in the labour market. Further modest tightening is expected from here.

Key Quotes

“Wage inflation is expected to have been modest in Q3 following a minimum-wage induced boost in Q2. But over the medium term, the underlying wage pulse is expected to improve gradually.”

“Strength in the labour market is supporting household sentiment, but the recent moderation in firms’ employment intentions poses downside risk to both employment and spending. Such risks will keep the RBNZ cautious.”

“Over the medium term, the labour market is expected to tighten modestly, with gradual declines in the unemployment rate expected as the migration cycle eases and population growth slows. We expect employment growth will remain firm but not spectacular, consistent with our expectation that the economy will struggle to grow above trend.”

“The labour market is close to full employment, but wage inflation remains weak. The RBNZ will want to see broad-based, persistent increases in wage and price inflation in order to meet their inflation objective, which we expect will occur only gradually.”

“Risks have also increased that could make it harder to keep the labour market near maximum sustainable employment and inflation at target over the medium term. Given this, we expect that the RBNZ will remain cautious and willing to support the economy if required, with the OCR on hold for the foreseeable future.”