10 February 2006

New Zealand unemployment increases

New Zealand unemployment at 3.6% as and unexpected loss of 1000 jobs occured in the last 3 months of 2005. As a result, the country's Reserve Bank is keeping interest rated on hold.

The fourth quarter unemployment rate is a higher-than-expected 3.6%, and Statistics New Zealand has revised its third quarter reading to 3.7% from the previously-advised 23-year low of 3.4%. The agency says the revision is due to changes in the calculation method.

Economists polled by Reuters had a median forecast for an unemployment rate of 3.5% in the fourth quarter.

It's the first drop in quarterly employment since the September quarter of 2002, and annual jobs growth is the lowest since the March quarter of 2003.

The participation rate for the fourth quarter was 67.8%, lower than the forecast of 68.1%, the revised September quarter figure.

Total hours worked fell 1.5% on the previous quarter.

Economists have noted when an economy experiences a strong run of full-time employment it's a signal employers are quite confident of hiring people for permanent positions, so seeing a decline is interesting.

New Zealand's unemployment rate has been falling since the December quarter of 2002 as strong immigration gains fuelled domestic demand, creating more jobs. However, immigration gains in the year through December were 60% below that of a year ago, which has slowed the growth in the labour force and in domestic demand.

Government statistician Brian Pink says while the tight market is showing definite signs of easing, overall there was little change in the labour figures in December.

And business groups say the current skills shortage could continue for some years despite the signs of easing. Phil O'Reilly from Business New Zealand says the long period of low unemployment means the skills shortage is unlikely to disappear quickly. He says strong demand for skilled labour could last for several more years.