Employment rise expected

The jobs market in New Zealand looks to be firmly in a growth phase with firms needing to expand their capacity as demand increases, Westpac economist Michael Gordon says.

Most economists are picking unemployment to fall and employment to have grown in the first three months of the year when Statistics New Zealand releases its figures tomorrow.

Growth in employment was likely to be more subdued than the combined 2.3% pace over the second half of last year.

Mr Gordon said Westpac expected the household labour force survey, the official measure of unemployment, to have dropped from 6% to 5.8%, which would be the lowest rate in five years.

''The unemployment rate now looks to be comfortably on a downward trend and our forecast is effectively a continuation of the recent pace of improvement.''

There were many indications the availability of jobs was improving rapidly, he said.

The ANZ business confidence survey showed a surge in hiring intentions over the past year, reaching record highs early this year.

Growth in online job advertisements had accelerated over the past six months and the Westpac McDermott Miller employment confidence index improved substantially in the March quarter.

''Even so, we're expecting just a 0.5% rise in employment for the March quarter, after gains of 1.2% and 1.1% in the previous quarters.

''Hiring intentions may be running hot but the limited evidence to date on actual employment growth has been a little less vibrant,'' Mr Gordon said.

ASB economist Daniel Smith expects unemployment to fall to 5.9%, mainly because of previous strong growth in the labour market.

In the six months to December, 53,000 jobs were added but the working-age population grew by 25,000 and the labour force by 46,000.

Strong growth in the supply of workers was expected to continue, with migration inflows being the main factor.

One important impact of the still high unemployment rate and a ready supply of workers was subdued wage pressures, he said.

Wage growth looked to have reached the bottom but would most likely rise only gradually.

Recent business surveys support that, with hardly any increase in the proportion of firms reporting difficulty finding workers.

One area that should generate some wage pressure over coming years was construction, Mr Smith said.

''Wage-cost growth in the sector has actually fallen over recent quarters, but that is likely to be short-lived. All indicators point to strong growth in construction activity over coming quarters and that will start to generate increased wage pressure, especially in the Canterbury region.''

Looking at the implications of an increased supply of labour, Mr Smith said it would boost the economy's production capacity and keep wage pressures contained.

That suggested wage growth would not push domestic inflation higher to any great degree.

The flipside of stronger population growth was its stimulative impact on the demand side of the economy, particularly in the housing market.

The Reserve Bank would need to revise its migration forecasts upwards again and that would flow through to its forecasts of domestic demand and the housing market, he said.

At the weekend, United States non-farm payrolls data showed jobs increased by 288,000, a bigger rise than expected.

Adding to the surprise, the US employment rate fell from 6.7% to 6.3%, although the fall was largely because the labour force shrank significantly.

More surprising was the market response.

Initially, the US dollar firmed and US long-term yields rose, which was what would be expected.

However, it appears the intensification of the Ukrainian conflict has investors nervous and the threat of serious military action trumped the reasonable economic data.


At a glance

• Unemployment expected to have fallen in first quarter.

• Slow growth in employment, mainly because of immigration.

• Wage pressures likely to be subdued.

• Reserve Bank still expected to lift interest rates in June.



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