Softening job market trends continue
The Kiwi labour market is showing signs of softening following a recent recession, with unemployment continuing to climb, Kiwibank reported.
“Get ready for another key data release ahead of the RBNZ’s August meeting,” said Mary Jo Vergara (pictured above), Kiwibank senior economist.
Next Wednesday, Stats NZ will provide an update on how the Kiwi jobs market fared over the June quarter.
Kiwibank’s calculations suggested the unemployment rate likely rose to 4.7% from 4.3%, marking the highest rate since the end of 2020.
Shifts in employment
After being stuck at record low levels of 3.2%, the unemployment rate began to climb in June last year.
“Employment growth is losing its shine and is becoming the main driver of a slack in the labour market,” Vergara said.
Stats NZ’s monthly employment indicators show declines in the number of jobs, with June marking the third consecutive month of filled job declines.
“It’s the first time since the 2008 GFC that the data has recorded three consecutive monthly falls,” Vergara said.
Business sentiment and hiring
The slowdown in hiring aligns with the deteriorating labour demand as the economy weakens.
“A net 25% of firms reduced their workforce over the quarter, a big increase from Q1’s net 11%,” Vergara said.
This sentiment is reflective of the clear mindset shift among businesses from increasing headcount to reducing it.
Wage growth and inflation
As the economy cools, wage growth is also expected to slow.
“Wage growth is cooling," Vergara said. “We expect to see a 0.8% quarterly rise in wages, pulling down the annual rate to 3.5% from 3.8%.”
Impact on RBNZ decisions
In light of growing talk and market speculation for earlier RBNZ rate cuts, Wednesday’s release holds high importance.
Vergara suggested that if the labour market data aligns with their forecasts or is even softer, the RBNZ may soften its tone further in August.
“We remain of the view that the RBNZ will cut rates earlier than they currently expect, with the cutting cycle commencing in November,” she said.
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