Strong economic growth is expected to have pushed New Zealand's employment level higher in September, Westpac senior economist Satish Ranchhod says.
Statistics New Zealand releases its third-quarter labour data tomorrow, with employment growth expected to have remained firm, pushing the unemployment rate down from 5.6% to 5.4%.
Mr Ranchhod expected the Household Labour Force Survey - the official measure of unemployment and employment - to show employment increased by 0.8% in the quarter, taking the annual increase to 3.22%.
''While this would be a step down from the rapid pace seen in early 2014, it will still be a solid increase and enough to push the unemployment rate down to 5.4% - its lowest level since 2009.''
There were a lot of moving parts underlying the expectation for a fall in unemployment, he said.
One of the most important and unpredictable in recent times was the participation rate - the share of the working-age population declaring themselves to be either in work (employed) or actively seeking work (unemployed).
Strong growth over the past year had encouraged more people to seek employment and Mr Ranchhod was expecting the participation rate to rise 69% in September, close to the record level reached in March.
Demographic factors also contributed to the participation rate, with strong net immigration and increasing participation by older workers.
''We expect these demographic factors to continue boosting the underlying trend in labour force participation for a few more years.''
However, while the trend in participation was for further increases, it could be volatile.
Such swings could push the unemployment rate around and the Quarterly Employment Survey would be watched to provide a cross check on the labour force survey.
Wage pressures were expected to have remained low in September, he said.
Wage inflation was not showing any acceleration since the financial crisis.
''But it's important to put the current low wage inflation in context.
"When New Zealand experienced high rates of nominal wage inflation in the late 2000s, we also experienced high rates of generalised inflation, which eroded households' purchasing power.''
Recently, although there had been low wage inflation, there had been even lower consumer price inflation.
Consequently, cost of living adjustments to wages had been modest, Mr Ranchhod said.
With the economy projected to grow at a robust pace in the coming year, unemployment was expected to decline and, at some stage, an increase in wage inflation could be expected.
Any substantive increase was likely to be next year's story.
In the near term, wage growth was expected to be a modest 1.8%, he said.
New Zealand's inflation rate for the September quarter was 1%, below the Reserve Bank's mid-point target of 2%.
Employment figures are not the only data of interest out this week.
BNZ senior economist Craig Ebert said today's ANZ Commodity Price Index was likely to show a fall of about 4% in October, mainly because the last dairy trade auction results were included.
Aluminium prices were expected to weigh heavily on the result.
The remainder of the commodity product prices covered would look robust, even buoyant.
The sharply lower currency in October, compared with September as a whole, would limit the fall in New Zealand dollar-denominated export price index to between 1% and 1.5%.
Tomorrow's GlobalDairyTrade auction would be difficult to pick as the price indicators were still not giving a clear steer on direction, he said.
The Quotable Value New Zealand house price index, being a three-month average of processed sale, was lagged and its October index, published at midday on Thursday would slow further relative to the 6.4% rise recorded in September.
''The real news will be in the QV narrative on how the housing market is doing now the election is behind us.''
The Government's September Crown accounts were due for release on Friday.
Mr Ebert suspected they would attract more attention than usual.
The June year results and tax revenue trends had each tended to fall short of expectations.
Attention would focus on whether the tax revenue data would reflect the recent economic growth to keep alive the slight chance of an operating surplus, as promised by Finance Minister Bill English during the election campaign.
The week ahead
Today: ANZ Commodity Index expected to show a 4% fall.
Wednesday: Unemployment expected to fall, employment expected to rise, wage rises kept low, in line with inflation; GlobalDairyTrade auction result hard to pick but Chinese demand important factor.
Thursday: QV house price index likely to show further fall in processed sales. Commentary on housing market since election is the real news.
Friday: Crown accounts for the three months ended September. Big question is whether Government hopes for financial surplus are still alive.
