The result aligned with the Reserve Bank of New Zealand’s own projection. Employment rose 0.2% over the quarter, falling short of the 0.3% estimate and representing a clear step down from the 0.5% gain recorded in the December quarter.
Key data points from the release were as follows.
- Unemployment rate: 5.3%, expected 5.4%, prior 5.4%.
- Employment change quarter on quarter: 0.2%, expected 0.3%, prior 0.5%.
- Participation rate: 70.4%, prior 70.5%.
- Labour Cost Index quarter on quarter: 0.5%, expected 0.4%, prior 0.4%.
- Labour Cost Index year on year: 2.0%, expected 2.0%, prior 2.0%.
The participation rate dipped to 70.4% from 70.5% in the prior quarter, marginally below the 70.5% forecast. Statistics New Zealand also noted a slight rise in the seasonally adjusted NEET rate, the proportion of 15 to 24 year olds not in employment, education or training, adding a note of caution to the otherwise solid headline figures.
On wages, the private sector Labour Cost Index excluding overtime rose 0.5% in the quarter, an acceleration from the 0.4% increase recorded in the prior period, leaving annual growth at 2.0%. The RBNZ will monitor wage data closely for any signs that price pressures are becoming entrenched, particularly as the energy shock from the Middle East filters through to broader costs.
Economists were broadly cautious about reading too much into the Q1 figures, noting that the US-Israel military campaign against Iran began on 28 February and that the full labour market consequences of the conflict were unlikely to become visible for another six to twelve months. Wage growth coming in at 0.5% for the quarter, a touch above the prior 0.4%, will keep the central bank alert to any entrenchment of price pressures, particularly as it prepares to update its forecasts at the end of May
