7 May 2014
NZ jobs should remain solid - BNZ
FXStreet (Bali) - According to BNZ Economists, Wednesday's jobs release, while not expected to be a spectacular one, should remain solid.
Key Quotes
Let’s be clear. New Zealand’s labour market pointers, having been robust over the last few years, have really taken off over the last six months or so. This strongly suggests further decline in the nation’s unemployment rate and greater than average wage inflation in the not too distant future. However, it’s probably asking too much for Wednesday’s suite of Q1 labour market data to post strong advances.
In the case of the Household Labour Force Survey (HLFS), it’s worth recalling that its employment measure increased 1.1% in the December quarter of last year, after a 1.2% lift in the September quarter. This put annual jobs growth at 3.0% (or 77,000 people employed). These are exceptionally strong numbers, and especially so relative to the 3.1% expansion in GDP over calendar 2013.
And so we don’t want to push expectations for the March quarter. We’ve settled on a solid, if unspectacular, 0.6% increase in Q1 employment (for a faster 3.4%, y/y). This would be (just) enough to trim the unemployment rate to 5.9%, from 6.0% in Q4, in the face of immigration-fuelled gains in labour supply and a 0.1 increase in the participation rate, to 69.0%.
The market polls are also picking 0.6% (3.4% y/y) for jobs, although a slightly lower unemployment rate, of 5.8%, on the basis of a steady participation rate of 68.9%.
Probably the more important market perspective on Wednesday’s HLFS, though, is that the Reserve Bank anticipated a 5.6% unemployment rate, as per its March Monetary Policy Statement. Given this involved annual employment growth of 3.5% (inferring a 0.7% increase for the quarter) we wonder if the Bank has factored in enough growth on the labour supply side, given the sudden increase in net immigration of late. Either that or the Bank assumes a flat to falling participation rate?
How the market reacts to Wednesday’s HLFS is more difficult than normal to get a feel for. We are most conscious, however, of last Friday’s US non-farm payrolls, which suggested that even if employment comes in above expectations (something still quite possible for the Q1 NZ HLFS) this might be downplayed if other elements look not so strong. In the case of the US payrolls it was the reversal in participation. In the case of the NZ HLFS it could be an unemployment rate that fails to fall much, if at all, thus appearing quite a bit looser than central bank expectations. And, let’s face it, the markets have, rightly or wrongly, been inclined to water down New Zealand’s projected OCR tightening over the last number of weeks. It’s what’s keeping local fixed-term mortgage rates from increasing in the manner the Reserve Bank probably prefers.
Key Quotes
Let’s be clear. New Zealand’s labour market pointers, having been robust over the last few years, have really taken off over the last six months or so. This strongly suggests further decline in the nation’s unemployment rate and greater than average wage inflation in the not too distant future. However, it’s probably asking too much for Wednesday’s suite of Q1 labour market data to post strong advances.
In the case of the Household Labour Force Survey (HLFS), it’s worth recalling that its employment measure increased 1.1% in the December quarter of last year, after a 1.2% lift in the September quarter. This put annual jobs growth at 3.0% (or 77,000 people employed). These are exceptionally strong numbers, and especially so relative to the 3.1% expansion in GDP over calendar 2013.
And so we don’t want to push expectations for the March quarter. We’ve settled on a solid, if unspectacular, 0.6% increase in Q1 employment (for a faster 3.4%, y/y). This would be (just) enough to trim the unemployment rate to 5.9%, from 6.0% in Q4, in the face of immigration-fuelled gains in labour supply and a 0.1 increase in the participation rate, to 69.0%.
The market polls are also picking 0.6% (3.4% y/y) for jobs, although a slightly lower unemployment rate, of 5.8%, on the basis of a steady participation rate of 68.9%.
Probably the more important market perspective on Wednesday’s HLFS, though, is that the Reserve Bank anticipated a 5.6% unemployment rate, as per its March Monetary Policy Statement. Given this involved annual employment growth of 3.5% (inferring a 0.7% increase for the quarter) we wonder if the Bank has factored in enough growth on the labour supply side, given the sudden increase in net immigration of late. Either that or the Bank assumes a flat to falling participation rate?
How the market reacts to Wednesday’s HLFS is more difficult than normal to get a feel for. We are most conscious, however, of last Friday’s US non-farm payrolls, which suggested that even if employment comes in above expectations (something still quite possible for the Q1 NZ HLFS) this might be downplayed if other elements look not so strong. In the case of the US payrolls it was the reversal in participation. In the case of the NZ HLFS it could be an unemployment rate that fails to fall much, if at all, thus appearing quite a bit looser than central bank expectations. And, let’s face it, the markets have, rightly or wrongly, been inclined to water down New Zealand’s projected OCR tightening over the last number of weeks. It’s what’s keeping local fixed-term mortgage rates from increasing in the manner the Reserve Bank probably prefers.