New Zealand: The unemployment rate declines further in Q4
New Zealand’s labor market continued to strengthen in Q4. The seasonally adjusted unemployment rate dipped from 4.6% in the third quarter to 4.5%, the lowest figure since 2008 and beating market expectations of 4.6%. The dip was driven partly by a rise in employment of 12,000 quarter-on-quarter, a moderation from 56,000 in Q3. But the decline was also influenced by a lower participation rate, as some workers left the labor force.
Although the multi-year low unemployment rate suggests a tight labor market, the underutilization rate—which encompasses both unemployment and underemployment—remains elevated at 12.1%, which is a sign that slack persists. This is probably why earnings growth is still muted, with recent figures showing wage inflation in the fourth quarter was 1.8%. The labor market could need to tighten further towards the levels seen before the 2008 financial crisis in order for a substantial pickup in wage pressure to occur.