29 Apr 2019

Labour market figures crucial to next interest rate step

1:09 pm on 29 April 2019

The state of the labour market will be disclosed this Wednesday and is expected to be a mixed bag.

Magnifying glass on job ads.

Economists are split on whether unemployment figures will go up, down or change at all in the latest quarterly report due out on Wednesday. Photo: 123RF

Unemployment rose at the end of last year and some economists are forecasting the first quarter will see another small increase, while others are picking it'll remain stable, or drop back slightly.

ASB senior economist Mark Smith is among those expecting unemployment to fall as well as reasonable employment growth.

That would show the Reserve Bank is meeting its mandate to maintain maximum sustainable employment.

But if the figures come in weaker than expected, Mr Smith said that would bump up the chances of an interest rate cut next week.

"Despite a recently tight labour market with the unemployment rate set to remain at about 4 percent over the next year or so, we'll continue to see very moderate wage growth," Mr Smith said.

"Given the link from wages to inflation it will mean medium term inflation will remain reasonably low and that will really be the catalyst through which the Reserve Bank will cut the cash rate."

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