Employment, population grow

Job growth is expected to remain strong in New Zealand through to 2016. Photo by Craig Baxter.
Job growth is expected to remain strong in New Zealand through to 2016. Photo by Craig Baxter.
Rising employment is more than keeping up with New Zealand's growing population, Statistics New Zealand labour market manager Diane Ramsay says.

Releasing the September unemployment figures yesterday, Ms Ramsay said strong migration meant the largest annual rise in population for 10 years.

''We had 72,000 more people employed over the year, greater than the additional 64,000 people in the population. This pushed our employment rate up to 65.2 of every 100 adults being in employment.''

However, while employment had grown strongly, the picture for wages was mixed, she said. Annual wage inflation was 1.6% in September, in line with the past four quarters.

Private sector wage inflation was 1.9% but growth in pay rates for the public sector had slowed to 1%.

The number of people employed had growth 3.2% since September 2013, the Household Labour Force Survey showed.

Demand for workers from established businesses rose 3% in the Quarterly Employment Survey - the largest annual increase in more than six years.

The construction industry accounted for nearly half of the employment growth. More than 40% of the growth in construction was in Canterbury, with a further 17% in Auckland, Ms Ramsay said.

BNZ head of research Stephen Toplis said the labour market data confirmed the economy was still advancing at a relatively rapid pace.

''With employment growth so strong, it should come as no surprise the unemployment rate fell further to 5.4%, its lowest reading since March 2009.''

That it did not fall further was due to a combination of a migration-driven surge in working age population and a modest increase in the participation rate. Without that, the labour market would be stretched close to breaking, he said.

As it was, the current level of unemployment was rapidly converging on the level the Reserve Bank considered inflationary.

The private sector wage rates only rose 1.9% in the year but it was still the highest reported reading for the series since September 2012.

If the trend continued, the BNZ expected annual growth should surpass Reserve Bank expectations by late next year, Mr Toplis said.

The New Zealand dollar responded to the release as if it was a positive surprise.

The dollar jumped US0.5c in the immediate aftermath of the release at 10.45am, something not justified by the data.

The Reserve Bank was expecting a 5.4% unemployment rate and a 3.4% annual increase in employment, he said.

''It is fair to say the data does not support the views of the increasingly vocal minority who contend either the New Zealand tightening cycle is done and dusted or the Reserve Bank may contemplate cutting rates.''

The robustness in employment argued strongly for further strength in domestic demand in an economy already running at an above-potential pace, Mr Toplis said.

The strength in employee compensation being seen suggested private consumption forecasts might be too conservative.

Not only would employment growth support spending but often overlooked was the rise in real wages, he said.

''Wages may not be increasing by much but they remain ahead of inflation.''

While it was true 47% of the employment increase was in construction, 53% of the job creation was outside construction and outside Christchurch, he said.

The BNZ was forecasting annual employment growth to remain above 3% through into 2016. Under normal circumstances, there would be panic about the labour market's ability to supply the necessary workforce.

However, there was no sign the net immigration flows seen recently were abating.

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