Covid and a heavy lockdown continues to maintain the pace of activity in the New Zealand economy and there are growing signs of overheating.
The country reported another 100 cases of the Delta yesterday – all in the North Island and all in or around Auckland.
The economy remains all but shut off from the rest of the world so far as airline and boat travel is concerned – trade is happening and the economy is enjoying not only solid growth, rising inflation and high dairy prices (which will pump an estimated $NZ13 billion into the economy between now and next August), but as we found out yesterday, record low unemployment.
As a result, another rate rise is in sight after the country’s unemployment rate hit a new multi-year low in the September quarter.
It was in fact an equal record low rate of 3.4% – only recorded once before in 2007. The September rate was down from 4% in the June quarter, a reading that saw the country’s central bank head towards last month’s rate rise.
The figure was well under market forecasts of 3.9% and will see the Reserve Bank of NZ (RBNZ) pushed rates up to 0.75% at its November monetary policy meeting. The central bank lifted rates at its October meeting.
Some even see a larger rise possible.
“With underlying inflation also above the RBNZ’s target in Q3, today’s data raise the risk of a 50-basis point rate hike by the RBNZ in November,” said Capital Economics economists forecast yesterday.
The number of unemployed fell by 18,000 over the quarter to 98,000, which, combined with 54,000 more people in employment, drove the unemployment rate down.
“The strong decline in unemployment brought the rate down to New Zealand’s lowest rate on record, matching December 2007, when it was also 3.4%,” work and wellbeing statistics senior manager Becky Collett said.
“The fall in the unemployment rate is in line with reports of difficulty finding workers and high labour turnover, and continued travel restrictions on international arrivals, which put pressure on domestic labour supply,” Collett said.
Stats NZ said average ordinary-time hourly earnings, as measured by its Quarterly Employment Survey, rose an annual 3.5% to reach $NZ35.25 an hour in the September quarter.
Fir the quarter earnings rose 0.7% over the previous quarter, versus forecasts of 0.8%
Annual wage for full-time workers in the private sector grew 2.5% in the latest quarter, from 2.2% in the three months to June.
“Given the extremely tight labour market and rising cost of living, we expect wage inflation will continue to rise to an annual rate of 3 per cent over the coming year,” she said.
Seasonally adjusted employment jumped 2.0% in the quarter, topping forecasts of a 0.4% increase. The participation rate rose to 71.2%, higher than the 70.6% forecast.
The “under-utilisation” rate, which measures unemployment along with the proportion of people in work but who would like more hours, and those wanting jobs but who are either unavailable or not actively seeking work – also fell – to 9.2% in the September quarter, down sharply from 10.5% in the June quarter.
That also matched the record low in that figure in 2007, Stats NZ said.
The RBNZ will meet on November 24 to review monetary policy settings after lifting its cash rate for the first time in seven years last month.
