Economic Note: Jobless rate rises, but more people in work

Q4 Employment growth remained healthy. Jobs growth was driven by full-time work, generally seen as a vote of confidence by employers. The key surprise was a further lift in labour force participation to a fresh record, which is the reason for the lift in the unemployment rate. The combination of strong migration inflows and a high willingness to work continues to strongly boost the supply of workers. Wage growth was fairly benign, with little sign of growing inflation pressure, and the surprising elasticity of labour supply will keep wage-driven inflation side-lined in the near term at least.

We continue to expect the RBNZ to hold the OCR at 1.75% at next week’s MPS, with the underlying data showing the labour market is still robust despite the uplift in the headline unemployment rate. But, just as there are no grounds to cut the OCR, equally there is no reason to expect hastened OCR increases. We expect the RBNZ to be on hold for an extended period, to late 2018.

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Nick Tuffley

ASB Chief Economist

Jane Turner

Senior Economist

Chris Tennent-Brown

ASB Wealth Senior Economist

Chris has worked as an economist for ASB and Commonwealth Bank of Australia in Sydney since 2005. His work has involved monitoring and forecasting trends in the New Zealand economy, with a focus on drawing implications for financial markets and investments. Chris is passionate about savings issues, and much of his current work is focussed on broadening peoples understanding of investments. Chris obtained a Bachelor of Commence at Auckland University, majoring in Economics, and prior to joining ASB worked in the funds management industry for Bankers Trust and BT Funds Management. With over 20 years' experience in finance, Chris has also spent several years farming, and was a New Zealand representative cyclist. When not at work, Chris likes to travel, cycle, and spend time with his family and numerous pets.

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