1 May 2024

Unemployment rate rises to 4.3%

12:59 pm on 1 May 2024

Unemployment has risen marginally, but wage growth remains solid, likely dashing hopes of interest rate cuts any time soon.

Stats NZ data showed unemployment rose to 4.3 percent in the three months ended March from 4 percent in the previous quarter.

The rate was the highest since mid-2021, and broadly in line with financial market and Reserve Bank expectations.

The surge in migration over the past year added 130,900 people to the population, with the workforce holding up at a record 4.3 million.

However, for the first time in nearly two years the number of jobs available fell by 6000 during the quarter, with the annual job gain about half the rate of the previous year.

The level of underutilisation, a measure of slack in the jobs market, rose to 11.2 percent from 10.7 percent, and there were signs of younger and older age groups either leaving the workforce or giving up looking for work.

Kiwibank chief economist Jarrod Kerr said the overall report was weak, with signs of people opting out.

"The lift in the 'not in the labour force' group was made up of older workers and teenagers. This is a reversal. We saw a big lift in older people remaining in work, and teenagers being attracted into the labour force post-Covid. No more."

Employment and unemployment generic photo.

File image. Photo: RNZ

Higher unemployment looms

Kerr said the labour market was usually the last part of the economy to give way as businesses held on to staff for as long as possible.

"The labour market lags the economy by about 9-to-12 months. So there's still another year of softness ahead."

Economists were broadly forecasting unemployment rising above 5 percent by the end of the year.

Meanwhile, the growth in wages edged lower, with the labour cost index of private sector at 3.8 percent, and another measure of hourly pay rates dipping below 5 percent.

ANZ economists said the slowing of the labour market would reinforce the Reserve Bank's view its anti-inflation policies have been working, but with more work to do.

"The RBNZ has not seen the traction it had anticipated in slowing domestic inflation. Until the RBNZ is confident they have done enough it is unlikely to contemplate reducing the OCR (official cash rate). We remain of the view that cuts will not occur until 2025."

Get the RNZ app

for ad-free news and current affairs