New Zealand Labour Market Report for the April to June quarter
- Unemployment rate: expected is 4.8%, prior was 4.9%
- Employment change q/q: expected 0.7%, prior was 1.2%
- Employment change y/y: expected 4.1%, prior was 5.7%
- Participation rate: expected 70.6%, prior was 70.6%
- Average hourly earnings: expected 0.9%, prior was 0.3%
- Private wages including overtime: expected 0.4%, prior was 0.4%
- Private wages excluding overtime: expected 0.5%, prior was 0.4%
Previews ... (any bolding in these summaries are mine)
Via ASB:
Q2's labour market release is the fourth quarterly release since the HLFS survey was updated in June 2016. As a result, this represents the first release in a year for which we can confidently analyse annual changes.
We expect employment growth of 0.7% over Q2, taking annual employment growth to 4%.
- The construction and tourism sectors are likely to have remained key sources for employment growth over Q2.
- However, there is a risk that capacity constraints limit potential employment growth in these sectors going forward.
We expect the unemployment rate to dip to 4.8%, the lowest unemployment rate in nearly 9 years.
- This is despite our forecast for the labour force participation rate to lift to a new record high of 70.7%, and is a sign of the current strength of New Zealand's labour market.
Despite the strengthening labour market, we expect wage pressure to have remained subdued over Q2.
- A key consequence of NZ's high net migration and high labour participation is that job creation has only just outpaced the increasing labour supply.
- We are expecting the Labour Cost Index to show private sector ordinary time labour costs rose 0.40% over the quarter, supported by the annual minimum wage increase.
- This would see annual wage inflation at 1.6%, indicating that real wages (on a labour cost basis) were flat over the year.
- For the equivalent Quarterly Employment Survey measure we expect annual wage growth of 1.2%.
Looking forward, however, NZ's robust growth outlook will support further strengthening in the labour market. Combined with growth in the participation rate levelling off, we expect to see sustained upward pressure on wages in the next few quarters.
ANZ:
Labour market figures for Q2 will likely show continued strong demand and the unemployment rate continuing to fall.
- We expect it to drop by 0.1%pts to 4.8% - an 8½-year low.
- Signs of accelerating wage growth, which history suggests should have emerged by now, will remain tentative at best.
- It is becoming increasingly clear, just as with the inflation process overall, that secular forces - especially the likes of technology - are outweighing cyclical themes.
- To be fair, we do expect wage growth to rise a little in time.
The Q3 figures should be mechanically boosted by the recent aged-care gender equality settlement. The fact that public wage growth (1.7% y/y on and LCI basis and 4.3% y/y on an hourly earnings basis in Q1) is running at a stronger pace than in the private sector suggests there is a risk of some catch-up for the latter. Despite dipping in Q2, headline inflation is up off its lows, which should see workers push for cost of living adjustments. Finding skilled labour remains the biggest problem facing firms, according to our Small Business Microscope.
BNZ:
Given that the RBNZ has the unemployment rate falling to 4.6% by March 2018 and the Labour Cost Index rising by an annual 2.0%, at that time, it seems unlikely to us that this week's labour data could move the RBNZ to a more hawkish stance.
- We are forecasting the unemployment rate to drop further to 4.8% thanks to a 0.7% increase in employment and a participation rate of 70.6%.
- This will reinforce our view that the labour market continues to tighten and the unemployment rate, if not already at the NAIRU, must be rapidly approaching an inflationary level.
We estimate that the Labour Cost Index (private sector all salary and wage rates) rose 0.4% for the quarter, 1.6% for the year.
- This is also the consensus view.
- The RBNZ's forecast is 0.6% and 1.7% respectively.
- Note that rounding issues make the comparison a little confusing. The key, though, is that it will take a big surprise for wage growth to exceed the RBNZ's assumptions by a meaningful margin.
Westpac:
We expect the Household Labour Force Survey will show that employment levels increased by 0.7% in the June quarter.
- Increases in employment are expected to be widespread, with larger gains in service sectors (including hospitality), retail and professional services.
- We also expect continued employment gains in the construction sector, though difficulties sourcing skilled labour may slow jobs growth on this front.
Labour force participation is expected to nudge higher again in June, taking it to a fresh record high of 70.7%.
- Jobs growth has encouraged more people to enter the labour market. This has been reinforced by strong net migration.
These factors are providing a floor under the unemployment rate, which we expect to remain unchanged at 4.9%.
Although the labour market has been strengthening, wage inflation remains low.
- We're expecting the June quarter Labour Cost Index will show that base wage rates rose by only 1.6% over the past year.
- Similarly, the broader QES measures of average hourly earnings is expected to have risen by only 1.3% - both largely unchanged from last quarter and still low.
- But while wage growth is currently low, this won't be the case forever.
- We expect that strong demand for workers, as well as increasing cost of living adjustments will contribute to rising wage inflation over the coming year.
