Stronger than expected employment change figure and a worsening jobless rate? Well, that paints a mixed picture of New Zealand’s labor sector, doesn’t it? Let’s dig deeper into the numbers to make sense of the latest jobs report.
1. Quarterly hiring up by 1.2% in Q4
The employment change component showed a 1.2% quarterly increase in hiring for the last three months of 2014, stronger than the projected 0.8% gain. To top it off, the previous quarter’s reading was revised higher to show a 0.9% rise in employment from the initially reported 0.8% uptick.
A quick review of previous releases shows that the employment change figure has been coming in stronger than expected for five out of the last six releases, indicating a positive trend in hiring.
2. Higher participation rate, higher jobless rate
The sudden jump in the jobless rate from 5.4% to 5.7% took most forex market watchers by surprise, as many expected the reading to fall to 5.3% given the strong surge in hiring. Don’t be too quick to chalk this up as a negative result though! A closer look at the underlying data indicates that the rise was actually caused by an increase in the participation rate, as the figure climbed from 69% to a record 69.7% during the period.
A higher participation rate basically means that more people are joining the labor force to look for work instead of giving up on their job hunt, as improving hiring prospects draw more applicants back in. This could also spur better consumer confidence and stronger spending later on.
3. Signs of wage growth seen
Averages wages posted a 0.5% gain for the quarter as expected, bringing wage inflation up by 1.8% for the year. This is safely above New Zealand’s annual CPI of 0.8% for now, which suggests that the increase in wages could translate to stronger spending and eventually more robust growth.
In a nutshell, the latest jobs report shows that New Zealand’s labor sector is faring well, which means that the RBNZ might not need to cut interest rates anytime soon. Prior to this release, the country’s dairy auction showed an impressive 9.4% jump in prices, indicating that its top industry may have already climbed of the rut and could contribute more hiring gains in the coming months.
Do you think the New Zealand economy will continue to perform better than the other major economies? And is the Kiwi likely to recover from its previous selloff?