7 Feb 2014

Strong inwards migration may slow fall in unemployment

6:55 am on 7 February 2014

ASB chief economist Nick Tuffley warns the rate of decline in the unemployment rate may slow because of the number of New Zealanders returning from overseas and seeking work.

Labour market figures released by Statistics New Zealand this week showed the unemployment rate at 6 percent, down from 6.2 percent at the end of September.

The labour force has grown by nearly 2 percent in the past two quarters alone, boosted by strong inward migration.

Mr Tuffley says the larger labour force is partially offsetting employment growth and slowing the fall in the unemployment rate.

He says if there continues to be strong net migration inflows into New Zealand, it means that even if there is relatively good employment growth, the unemployment rate may only fall relatively gradually because there is a pick-up in the number of people seeking work.

Mr Tuffley says one of the key benefits of the economic recovery is more likely to be through stronger employment growth for New Zealanders, but wage growth may not pick up initially if the number of people looking for work continues to expand.

He says that suggests the unemployment rate will not fall quickly and the skills shortages will not develop very quickly.