Spotlight goes on employment and wages

Employment and wages data will be the focus this week, coming as it does so soon after the National Party outlined its workplace policies for the election on November 26.

Opposition parties will focus on the number of young people out of work, along with the possible continued high numbers of unemployed Maori and Pacific Islanders as a sign the Government has not made the progress on employment it earlier promised.

National plans to introduce youth rates if re-elected, as a way of increasing the number of young people entering the workforce.

Tomorrow, Statistics New Zealand will release its quarterly employment survey and labour cost index which will give some indication of hours worked, filled jobs and full-time-equivalent employment.

The quarterly survey measures the labour market over one week in mid-September, not the full three months to September, and could overstate any Rugby World Cup effect on hiring in the quarter as a whole.

On Thursday, the household labour force index will be released with unemployment expected to dip to 6.3%, down from 6.5%.

Westpac chief economist Dominick Stephens said the New Zealand recovery was surprisingly patchy through the middle of the year and there had been additional signs of slowing momentum in the past couple of months. At the same time, reported hirings by businesses had dropped back to around average rates in the June and September quarters, after a bit of a lift at the start of the year.

That suggested at best moderate employment growth in the September quarter and unemployment, now at 6.5% for two quarters, continuing to track at elevated levels, he said.

"There are reasons to think the surveys aren't fully capturing the impact of the Rugby World Cup on hiring in the quarter and recent monthly jobs data suggests that impact could be quite large. It's in recognition of this that we're picking 0.8% employment growth over the quarter and a dip in the unemployment rate to 6.3%."

A big jump in employment could well see a market response. But any RWC effect would be temporary and would have little bearing on the longer-term outlook for the labour market or the economy, Mr Stephens said.

Westpac continued to expect a gradual decline in the unemployment rate from current high levels over 2012 as construction activity increased.

For its part, the Reserve Bank was keeping one eye on the global situation and the other on the Christchurch reconstruction, he said.

"Like us, it will be looking through any RWC fillip, and based on the OCR review - and noting that the Reserve Bank's September monetary policy statement pick of an unemployment rate at 6.3% predated the recent weak GDP data and business surveys - we suspect that even a soft underlying picture wouldn't dislodge the Reserve Bank from its existing plans."

The market is picking the first lift in the OCR will be in June next year with a 0.5% rise to 3%.

Mr Stephens expected growth in the labour cost index to be around average for the September quarter, rising 0.6% to be up 2.1% for the year. The lift from June, when it rose 0.5%, was seasonal as many people received their pay reviews in the second half of the year.

Growth in the quarterly employment survey's average wage measure could be a bit below its September average.

Westpac was picking 0.8% growth and 2.9% growth over the year.