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The New Zealand dollar fell by more than half a US cent today after Statistics NZ (SNZ) labour data showed that the employment rate fell to its lowest point in 10 years in the December quarter.
Unemployment fell to 6.9 per cent in the quarter, down from 7.3 per cent in the September quarter.
The drop in the unemployment rate was entirely due to the largest ever quarterly decline in the participation rate - to 67.2 per cent from 68.4 per cent - meaning a large number of people left the labour force over the quarter.
SNZ said the employment rate fell by 0.8 percentage points to 62.6 percent over the December quarter. It was the third consecutive fall in the employment rate, after employment had been relatively unchanged for about two years.
Westpac economists said SNZ's Household Labour Force Survey (HLFS) had come up with an "oddball assessment" of the labour market.
"The net result was negative market reaction, but we are sceptical of the survey results," Westpac said in a commentary.
The New Zealand dollar dropped by 60 basis points to US84.43c from US83.83c just after the release.
"Our assessment of the labour market has not really changed - it is still weak, but we do not believe that it has suddenly gotten sharply better or worse," Westpac economists said in a commentary.
The HLFS showed there was a 6 per cent decline in part-time work over the quarter, which caused a decline in overall employment.
"The labour market is still weak, but we do not believe that it has suddenly gotten sharply better or sharply worse," Westpac said.
ASB Bank chief economist Nick Tuffley said the survey results can be volatile, but showed that the labour markets of the Auckland and Canterbury had improved while the rest of the country had gone backwards.
The reported weakness in employment would reinforce the view that interest rates would remain on hold for a while further, Tuffley said.
ASB expects the Reserve Bank's official cash rate to remain on hold until March next year.
- Jamie Gray, APNZ business reporter