New Zealand Q3 unemployment hits 4-year high, more rate cuts coming
Adds analyst comment, background on RBNZ
By Wayne Cole
SYDNEY, Nov 6 (Reuters) -New Zealand's jobless rate rose to a near four-year high in the September quarter as employment dropped by the most since 2020, cementing market wagers another outsized cut in interest rates will be delivered later this month.
Wednesday's data from Statistics New Zealand showed the unemployment rate rose to 4.8% in the third quarter, from 4.6% the previous quarter and just under analyst forecasts of 5.0%.
Michael Gordon, a senior economist at Westpac, noted more youngpeople had exited the workforce altogether so limiting the increase in measured unemployment.
"The bottom line is still that employers are shedding workers, and wage pressures are easing accordingly," he added.
"That's consistent with the view that inflation pressures are being reined in and that monetary policy no longer needs to be as restrictive."
The economy has been struggling since the Reserve Bank of New Zealand (RBNZ) began raising interest rates aggressively in 2021 to fight surging inflation. The tightening has worked to tame prices, but at the cost of lifting unemployment from a low of 3.2%.
Employment also fell 0.5% in the third quarter, the steepest drop since the same quarter of 2020 and beyond forecasts of a 0.4% dip. The job participation rate was 71.2% in the third-quarter, under forecast of 71.5%.
The loosening labour market saw private sector wages rise a modest 0.6% in the quarter, dragging annual growth down to 3.4%. Growth in overall wages slowed to 3.9%, a long way from the 7.6% peak seen in early 2023.
That easing should help put more downward pressure on inflation, which dropped to 2.2% in the third quarter from a 2022-high of 7.3%. That took inflation back into the RBNZ's target band of 1.0% to 3%, encouraging it to flag a series of rate cuts ahead.
It has already chopped rates by 75 basis points in just two meetings, and markets are fully priced for another 50 basis points at its next meeting on Nov. 27. 0#RBNZWATCH
Swap rates even imply around a 20% chance the central bank could ease by a whopping 75 basis points, in part because the following meeting is not until the middle of February.
Just Tuesday, the RBNZ issued a bleak outlook for the economy warning that more households faced default on their mortgages while increasing numbers of businesses were going bust.
Asked at a media conference what concerned him most, RBNZ Governor Adrian Orr nominated unemployment as the stimulus from rate cuts would take months to feed through.
Reporting by Wayne Cole; Editing by Sam Holmes
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