The unemployment rate in New Zealand rose from 3.2% in the September 2022 quarter to 4.8% in the current quarter, according to data released by Stats NZ.
The Reserve Bank of New Zealand (RBNZ) had anticipated an unemployment rate of 5%, making the actual figure of 4.8% a somewhat better outcome than expected in the financial markets.
Market analysts speculate that this data supports a possible 50-basis-point (bps) rate cut from the RBNZ during its upcoming meeting on November 27. The outlook for a more aggressive 75-bps cut appears less likely following these results.
Westpac New Zealand’s markets strategist, Imre Speizer, reported a slight increase in the Kiwi/Aussie cross rate, which rose to A90.6c from A90.4c following the release of the data.
”In terms of what it means for the Reserve Bank, it’s roughly neutral. It’s moving in the right direction, but it does not endorse the case for those who have speculated on a 75 bps cut, so it has taken that mostly off the table,” Speizer said.
The smaller-than-anticipated increase was attributed to a higher number of young individuals leaving the labour force, according to Westpac chief economist Michael Gordon. He noted that the decline in participation was particularly pronounced among young people aged 15 to 24.
“In the initial post-Covid period, the economy was running hot and the border closure meant that migrant workers weren’t available. In this time, many young people were drawn into the labour force to fill the gap – often at the expense of study.”
“As the economy has slowed and migration has rebounded, this group has been at the forefront of job losses. While this has led to a rise in the number of unemployed, we’re also increasingly seeing young people return to or remain in study, ending their job search altogether.”
KiwiBank senior economist Mary Jo Vergara also commented on the data, saying the labour market was even more fragile than the headline indicated.
Moreover, ASB senior economist Mark Smith claimed that the data presented a varied picture regarding market and RBNZ expectations. However, it indicated that the prolonged decline in economic activity was “now catching up with the labour market.”
“The balance of power is shifting away from employees, with employment levels contracting and the unemployment rate rising,” he said.