New Zealand: The unemployment rate declines further in Q1
New Zealand’s labor market continued to strengthen at the start of this year. The seasonally-adjusted unemployment rate dipped from 4.5% in Q4 to 4.4% in Q1, marking the lowest print since Q4 2008 and beating market expectations of 4.5%. The decline was partly driven by a rise in employment of 15,000 workers in Q1, up from 12,000 in Q4. But the drop was also influenced by a lower participation rate, as some workers left the labor force.
Although the multi-year low unemployment rate points to a tight labor market, the underutilization rate—which includes both unemployment and underemployment—remains elevated at 11.9%, a sign that slack remains. This is likely why earnings growth remains timid, with recent figures showing wage growth in Q1 of 1.8%, matching Q4’s reading. The labor market could need to tighten further towards levels seen before the 2008 financial crisis for meaningful wage pressure to take hold.