New Zealand: The unemployment rate declines further in Q1

New Zealand’s labor market continued to strengthen at the start of this year. The seasonally-adjusted unemployment rate dipped from 4.5% in Q4 to 4.4% in Q1, marking the lowest print since Q4 2008 and beating market expectations of 4.5%. The decline was partly driven by a rise in employment of 15,000 workers in Q1, up from 12,000 in Q4. But the drop was also influenced by a lower participation rate, as some workers left the labor force.

Although the multi-year low unemployment rate points to a tight labor market, the underutilization rate—which includes both unemployment and underemployment—remains elevated at 11.9%, a sign that slack remains. This is likely why earnings growth remains timid, with recent figures showing wage growth in Q1 of 1.8%, matching Q4’s reading. The labor market could need to tighten further towards levels seen before the 2008 financial crisis for meaningful wage pressure to take hold.

New Zealand Unemployment Rate Forecast

FocusEconomics Consensus Forecast panelists expect the unemployment rate to average 4.5% in 2018, which is down 0.1 percentage points from last month’s forecast. For 2019, the panel expects the unemployment rate to drop to 4.4%.