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Elevate Magazine
February 3, 2025

NZ Labour Market Data Expected to Show a Challenging Q4

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Photo source: Getty Images, Compassionate Eye

Economists are expecting a challenging fourth-quarter labour market report set to be released on Wednesday, February 7.

BNZ’s head of research, Stephen Toplis, said he has projected that the unemployment rate will rise to 5.1%. 

“An increase in Q4 jobseeker benefit numbers released last week is also indicative of the unemployment rate continuing to rise,” he said.

Meanwhile, NZ economist Henry Russell noted that while the country’s economy appears “to have bottomed out and is now recovering,” the labour market is still lagging behind in catching up to the previous decline in economic activity.

“We expect the unemployment rate to lift from 4.8% [in the third quarter] to 5.1% [in the fourth quarter] in line with the RBNZ’s November MPS forecast,” Russell stated. 

Westpac senior economist Michael Gordon has also projected that the unemployment rate for New Zealand will reach approximately 5.0%. 

“That’s a touch less than the 5.1% that we and the Reserve Bank had previously forecast, reflecting the fact that recent jobs data has been slightly better than expected,” he said.

“There are signs that the economy was starting to stabilise at the end of last year, partly due to the initial effects of lower interest rates.”

ASB’s senior economist Mark Smith indicated that the economic slowdown appears to have finally impacted the labour market. He forecasts a net loss of 30,000 jobs over the course of 2024, marking a second consecutive quarterly decline in employment.

He expects the rise in the unemployment rate to 5.1% by the fourth quarter of 2024, which would be the highest level observed in four years.

Given that inflation is near the target midpoint and monetary policies are continuing to slow the economy, additional rapid monetary easing to mitigate potential damage to the economy and labour market seems advisable to implement. 

Smith says he is expecting “another 50 basis point OCR cut in February (to 3.75%), with the RBNZ to then revert to a more measured pace of easing, and with the OCR hitting 3.25% by mid-2025.” 

As of November 2024, the OCR was reduced to 4.25%