Annual wage and salary growth fell to its lowest level for nearly a decade in the December quarter, but some economists see the labour market nearing a trough with a slowing in the decline in hours paid.
Figures published by Statistics New Zealand (SNZ) today show an annual rise of 1.8 percent in salary and wage rates, including overtime, as measured by the labour cost index (LCI).
That continued a decline in annual wage growth over the past 15 months from a peak of 4 percent in the year to September 2008, and was the lowest annual increase since 2001.
Salary and wage rates, including overtime, for the public sector rose 2.4 percent, while for the private sector the increase was 1.6 percent.
The rise for the public sector was the lowest since 2004, while the private sector increase was the lowest since 2001, SNZ said.
Meanwhile, the quarterly employment survey (QES), also published today, showed that for the year to December, employment, as measured by the number of full-time equivalent employees, decreased 2.5 percent and filled jobs decreased by 1.7 percent.
ASB chief economist Nick Tuffley said the data reflected the continued weak state of the labour market at the end of last year, although there was a hint of stabilisation in conditions.
An improvement in hiring intentions in recent business surveys suggested the labour market was near its trough, and ASB economists expected a recovery in employment this year, Mr Tuffley said.
An improvement in employment in the retail sector drove the increase in filled jobs and full time equivalents in the fourth quarter, but recent anecdotes suggested the retail sector would still face hurdles in the coming year.
The Household Labour Force Survey employment report, to be published on Thursday, wold give a better idea of how much slack remained in the labour market and how long wage growth would remain subdued, Mr Tuffley said.
Goldman Sachs JBWere economist Philip Borkin said he expected the labour market to begin to stabilise over this year, although there were few concrete signs of that yet.
Today's data could hardly be viewed as evidence of the self-sustaining recovery the Reserve Bank was looking for, Mr Borkin said.
"Yes, it is true that businesses are feeling more confident and are reporting an intention to go out and hire and invest. But intending to do something is one thing, and actually going out and doing it is another. There remains a general cautiousness from firms."
ANZ was cautious about job creation in the recovery, pointing to significant slack within the current workforce.
"Firms will likely look to increase their current workforces' hours rather than adjust absolute staffing levels. This will mean the unemployment rate may stabilise at a higher level than we had been accustomed to in past recoveries."
As measured by the LCI, in just the December quarter, salary and wage rates, including overtime, increased 0.4 percent, following a rise of 0.5 percent in the September quarter.
Both the public and private sectors recorded increases of 0.3 percent in the December quarter.
The slow-down in annual wage rate growth happened during a period in which the business demand for labour declined, SNZ said.
The QES showed that seasonally adjusted gross earnings rose 1.9 percent for the year to December, while seasonally adjusted total paid hours fell 1.8 percent for the same period.
For the December quarter seasonally adjusted total paid hours fell 0.3 percent, while seasonally adjusted total gross earnings rose 0.1 percent.
Filled jobs rose 1.2 percent for the quarter, and full-time equivalent employees were up 1.4 percent.
According to the QES average total hourly earnings rose 3.7 percent in the year to December but slipped 0.2 percent for the quarter.
QES average earnings statistics reflect not only changes in pay rates, but also compositional and other changes across and within the paid workforce. In comparison, the LCI measures changes in salary and wage rates for a fixed quantity and quality of labour input.
