NZ: Labour Market Conditions


Tue Aug 16 17:45:00 CDT 2016

Actual Consensus
Employment Change (Q/Q) 2.4%
Unemployment Rate 5.1% 5.3%
Employment Change (Y/Y) 4.5%

Highlights
The June quarter unemployment rate was 5.1 percent, down from 5.2 percent in the first quarter. The number of employed increased by 58,000 after rising by 32,000 in the first quarter. The large increase in employment partly reflects improvements to the survey including better identification of self-employed people.

Definition
The Labour Cost Index (LCI) measures movements in base salary and ordinary time wage rates and overtime wage rates. The non-wage component measures cost changes including annual leave and statutory holidays; superannuation; ACC employer premiums; medical insurance; motor vehicles available for private use low interest loans. The LCI is a measure of the extent to which changes in businesses' input costs put pressure on the output prices they charge for goods and services.

Description
As a measure of labour cost, the LCI helps the Reserve Bank of New Zealand measure inflation. The RBNZ, with an inflation target range of 1 percent to 3 percent uses this index in addition to other price indices to measure possible pressures in consumer prices.

RBNZ officials are always on the lookout for the prospects of inflationary pressures. Wage pressures tend to percolate when economic activity is booming and the demand for labor is rising rapidly. During economic downturns, wage pressures tend to be subdued because labor demand is down. By tracking labor costs, investors can gain a sense of whether businesses will feel the need to raise prices. If wage inflation threatens, it's a good bet that interest rates will rise, bond and stock prices will fall.