The annual unemployment rate in New Zealand in Q3 rose to 4.8%, up from 4.6% in the previous quarter, according to data released on Wednesday by Stats NZ.
This increase is marginally lower than the financial market's expectations and marks the highest unemployment rate since December 2020. However, it remains below the Reserve Bank's forecast, which had anticipated a 5% rate.
The rise in unemployment is largely attributed to a decrease in demand for workers, coupled with a surge in migration that has helped fill the labour shortages that previously existed in the market, 1News reports.
“While net employment remained stable, there were changes in who was employed last year, as 45,700 people who had been employed became jobless,” said Stats NZ labour market manager Deb Brunning.
The level of underutilisation, which measures the slack in the labour market, eased slightly to 11.6%. At the same time, there was an increase of 57,000 individuals leaving the workforce.
This shift has been attributed to various factors, including more people returning to education, experiencing disability, retiring, or becoming discouraged from actively seeking employment.
“Some of the largest increases for those not in the labour force over the year came from people mainly engaged in leisure activities, studying or training, and taking care of themselves due their own sickness, illness, or disability,” Brunning added.
Furthermore, wage growth over the past year slowed to 3.8%, down from 4.3% previously.
Private sector wages increased by 3.3% annually, marking the lowest growth in nearly four years, while public sector wages rose by 5.6%, largely due to pay settlements, such as the recent police deal.
This slowdown in wage growth comes in the wake of a Reserve Bank of New Zealand (RBNZ) report, which highlighted that rising unemployment is affecting more households. The increased unemployment is making it harder for many to service their loans, leading to a rise in bad debt levels.
“Banks have reported to us that many highly indebted households have little incomes or savings buffers available. This makes them vulnerable to unanticipated costs or losses of income,” according to the report.
Moreover, the data presented a mixed picture but clearly indicated the effects of a weaker economy, said ASB senior economist Mark Smith.
“They confirmed that the New Zealand labour market is cooling given recessionary conditions for economic activity.”
He added that the supply of labour had also cooled, citing the significant slowdown in immigration as a contributing factor.
“More importantly, however, the Q3 figures showed easing worker attachment to the labour force as the prospect of finding work diminishes.”
Smith also stated that the slowdown in wage pressures would exert additional downward pressure on domestic inflation, helping to keep it within the Reserve Bank's target range of 1-3%.
“The RBNZ will also be wary of the wider economic, social and labour market costs from retaining overly restrictive official cash rate (OCR) settings. A frontloaded pace of policy easing remains appropriate for now, with another 50-basis point OCR cut expected in November,” Smith said.