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NZ: Labour Market Conditions
| Consensus | Consensus Range | Actual | Previous | |
| Employment- Q/Q | 0.2% | 0.5% | ||
| Employment -Y/Y | 0.4% | 0.2% | ||
| Unemployment Rate | 5.4% | 5.3% to 5.4% | 5.3% | 5.4% |
| Labour Market Cost Index - Q/Q | 0.5% | 0.4% | ||
| Labour Market Cost Index - Y/Y | 2.0% | 2.0% |
Highlights
New Zealand labour market statistics for the three months to March showed weaker employment growth but a small drop in the unemployment rate. Labour costs grew at a steady pace. The Reserve Bank of New Zealand left policy rates on hold at their most recent meeting last month. Although they considered the merits of a pre-emptive rate hike to deal with potential inflation risks, they concluded that doing so would risk"unnecessarily stifling the economic recovery".
Employment rose 0.2 percent on the quarter in the three months to March after advancing 0.5 percent in the three months to December, with employment up 0.4 percent on the year after increasing 0.2 percent previously. The unemployment rate fell from 5.4 percent to 5.3 percent, while the participation rate rose from 70.3 percent to 70.4 percent.
Headline private sector wages growth was steady in the three months to March. The labour cost index rose 0.5 percent on the quarter after a previous increase of 0.4 percent, while year-on-year growth was unchanged at 2.0 percent, the smallest increase since the start of 2021.
Market Consensus Before Announcement
The jobless rate is expected flat at 5.4% in Q1 versus 5.4 percent in Q4.
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.