NZ unemployment rate unexpectedly widens to 6.8%, NZ$ falls

NZ unemployment rate unexpectedly widens to 6.8%, kiwi dollar drops

By Jonathan Underhill

Feb. 3 (BusinessDesk) - New Zealand’s jobless rate unexpectedly widened in the fourth quarter, sparking a sell-off in the kiwi dollar which dropped as much as half a cent on the release as the country’s economic recovery struggles to take hold.

The jobless rate rose to 6.8% in the fourth quarter, from 6.4% three months earlier, according to Statistics New Zealand. The data showed New Zealand’s participation rate weakened to 67.9%. The kiwi dollar fell as low as 77.16 U.S. cents from 77.70 cents immediately before the release, and recently traded at 77.30 cents. Unemployment was expected to hold at 6.4% in the latest quarter, with a participation rate of 68.3%, according to a Reuters survey.

“The data looks genuinely weak, which is indicative of fragile market,” said Mike Jones, strategist at Bank of New Zealand. “I guess the negative surprises in the New Zealand economy continue, and the unemployment numbers are just another piece of data that will give the Reserve Bank more time to keep rates low.”

The fourth-quarter Household Labour Force Survey continues the see-saw ride for the jobless rate, which was at 7% a year ago, fell to 6% in the first quarter 2010 and jumped back up to 6.9% in the second quarter. Reserve Bank Governor Alan Bollard kept the official cash rate unchanged at 3% last week, saying he needs to a “more robust” recovery before he tightens monetary policy. Still, the bank is forecasting a return to growth this year after the economy narrowly avoided recession in 2010.

Traders are betting Bollard will hike the benchmark rate by 59 basis points this year, according to the overnight index swap curve.

More than a quarter of New Zealand firms intend to take on new staff over the next few months, according to a Hudson Recruitment survey last month.

The HLFS comes two days after government figures showed wages grew 0.6% in the final three months of 2010, beating estimates, for an annual pace of 1.9%, the fastest since the third quarter of 2009. Still the Quarterly Employment Survey showed filled jobs edged up just 0.1% and were down 0.4% on the year.

The labour force participation rate is now at the lowest level since the first quarter of 2008. Total people employed fell 0.5% to 2.18 million while those out of work rose by 8,000, or 5.1%, to 158,000. New Zealand’s total working age population rose by 12,800, or 0.4%, to 3.44 million in the final three months of 2010.

Part-time employment fell by 2.8% in the latest quarter, while full-time employment rose by 0.3%.

The central bank estimates quarterly economic growth will peak at 1.4% in the September quarter. Surging commodity prices, the rebuild of Canterbury after the earthquake and an influx of foreign exchange from Rugby World Cup tourists are likely to underpin the economy, it has said.

In the fourth quarter, unemployment in the Canterbury region rose to 6% from 4.8%, below the national average, while the participation rate rose to 70.7%. Will Bell, a statistical analyst at the department said there was no clear emerging pattern yet in the regional numbers that would suggest a spike in Canterbury’s data in the wake of the quake. The first signs may emerge in building consents figures.

The jobless rate was highest in Northland, at 8.9%, with the nation’s lowest participation rate at just 62.7%.

In Auckland, the unemployment rate was 7.8% and the participation rate was 67.3%.

New Zealand’s unemployment rate is the 12th-lowest in the OECD.

(BusinessDesk)

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