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4 May 2016
NZD: Labour market is in reasonable health – ANZ
Philip Borkin, Senior Economist at ANZ, suggests that the NZ unemployment rate partially retraced its Q4 fall, lifting to 5.7% (from an upwardly revised 5.4%) but it is a reasonable signal, with the unemployment rate trending lower overall.
Key Quotes
“Labour demand remained strong in Q1, building on Q4’s decent gain. HLFS employment rose a stronger-than-expected 1.2% q/q, which lifted annual growth to 2.0%. Labour supply also rebounded, with the labour force growing 1.5% q/q.
While some may argue that the lift in the unemployment rate is a weaker sign, we wouldn’t. The lift in the quarter was entirely the result of strong participation, which is an encouraging sign. Moreover, and as mentioned, the unemployment rate is still trending lower. We therefore judge that labour market capacity is slowly reducing, which is certainly consistent with the anecdotes we are picking up on the ground.
Today’s figures certainly do not rule out further monetary policy easing. The data was strong in Q4 and the RBNZ still cut in March. Dairy, NZD, and global wobbles all make an argument for cutting. However, reducing labour market spare capacity, in combination with housing and re-leveraging behaviour, mean further easing is far from a done deal in our view – particularly as soon as June.”
Key Quotes
“Labour demand remained strong in Q1, building on Q4’s decent gain. HLFS employment rose a stronger-than-expected 1.2% q/q, which lifted annual growth to 2.0%. Labour supply also rebounded, with the labour force growing 1.5% q/q.
While some may argue that the lift in the unemployment rate is a weaker sign, we wouldn’t. The lift in the quarter was entirely the result of strong participation, which is an encouraging sign. Moreover, and as mentioned, the unemployment rate is still trending lower. We therefore judge that labour market capacity is slowly reducing, which is certainly consistent with the anecdotes we are picking up on the ground.
Today’s figures certainly do not rule out further monetary policy easing. The data was strong in Q4 and the RBNZ still cut in March. Dairy, NZD, and global wobbles all make an argument for cutting. However, reducing labour market spare capacity, in combination with housing and re-leveraging behaviour, mean further easing is far from a done deal in our view – particularly as soon as June.”