Jobs data better than expected

Unemployment has dropped further than expected, to 5.6% for the quarter to June - a five-year low - and 2.32 million New Zealanders are in work.

The growth in jobs was underpinned by the Canterbury rebuild, with an extra 10,000 added to the overall ranks of employed to hit 2.32 million, while those unemployed fell by 9000, to 137,000.

''The unemployment rate fell from a revised 5.9% to 5.6% and is the lowest it has been since the March 2009 quarter,'' Statistics New Zealand labour market and households statistics manager Diane Ramsay said yesterday.

Westpac senior economist Michael Gordon said the positive surprise on the unemployment rate was tempered by softer-than-expected results for jobs growth and workforce participation - although these parts of the survey can be especially subject to survey volatility and are arguably less meaningful.

He said the employer-based quarterly employment survey, also released yesterday, showed a ''very solid'' 1.1% lift in full-time-equivalent employment.

On balance, the June quarter data pointed to less slack in the labour market than expected, with the unemployment rate coming in below forecast at 5.6% and wage inflation a little higher than expected, Mr Gordon said.

''As such, today's data will support the Reserve Bank's intention to raise the official cash rate (OCR) over the next few years.

''However, they are unlikely to outweigh the ongoing drop in dairy prices in the Reserve Bank's mind and nudge it out of its `period of assessment' any time soon,'' he said.

ASB chief economist Nick Tuffley said by his estimate Christchurch employment grew 1.7%, quarter on quarter, and the rebuild impact ''remains firm''.

''The unemployment rate in Christchurch is now very low, highlighting the likelihood of wage growth in that region outstripping national trends,'' Mr Tuffley said.

''The strength of employment in Christchurch dovetails with jobs strength in the construction sector, with employment up 4.8%, quarter on quarter; by our estimate 16.8% year on year.

''Quarterly employment was strong in mining, the utilities, and rebounded in manufacturing [but] services industries and retail were generally weak,'' he said.

The recent labour market story has been a rise in labour force participation to a record rate, which we had put down to the strong net migration flows, he said.

ASB retained its view the Reserve Bank would next lift the OCR in December.

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