Workforce increases but unemployment remains high at 6%

New Zealand's workforce participation rate has lifted to the highest level on record but the unemployment rate remains stubbornly high at 6%, as population growth and rising immigration take care of the extra jobs created.

The high participation rate is also keeping wage growth weak.

Statistics New Zealand figures released yesterday showed annual employment growth had risen by a solid 3.7%.

That means a total of 83,000 more people were employed in the March quarter compared with the same quarter a year ago.

New Zealand's participation rate was now 69.3%.

A substantial driver of the overall movement in employment, participation and migration was Christchurch, where the rebuild was swinging into action.

BNZ head of research Stephen Toplis said there was something for everyone in the labour market employment reports.

''The data shows, unequivocally, the economy is on fire. That would tend to suggest the Reserve Bank needs to get interest rates back up to at least neutral as soon as possible.

''But that said, there was little sign in the data such economic strength was translating into inflationary pressure, particularly in the labour market.''

Soaring employment was a major driver of the total compensation of the PAYE sector, which in turn fed directly into expenditure on housing and through the retail sector, he said.

Indirectly, it also supported spending through the elevated confidence levels occurring as a consequence of heightened job security.

It also appeared as a large chunk of the growth was supply-driven, Mr Toplis said.

The substantial increase in net migration was adding supply to the labour force.

The number of people entering the labour force over the 12 months ended March was almost identical to the numbers gaining employment.

That kept the participation rate high and unemployment at 6%. With the unemployment rate hanging up at 6%, there was the suggestion of still more capacity in the labour market and wages did not yet need to push higher.

That was the case in March.

The quarterly increase in the Labour Cost Index - private sector all salary and wage rates - was just 0.4%, leaving the annual reading at 1.6%, below the Reserve Bank's 1.8% expectation.

Labour Party labour issues spokesman Andrew Little said the wage figures showed 46% of wage and salary earners did not get a pay rise in the past year, a higher percentage than those who missed out the previous year.

The annual median increase - the level where half of all earners earn more and half earn less - showed the lowest increase in more than 13 years.

Wage rates were the most important measure of whether the benefits of economic growth were being shared, because they related to the price of labour as agreed between workers and employers.

''Today's figures show they are not keeping pace with the cost of living. The one thing we expect as a matter of fairness is that as the economy grows, wage rates will rise in real terms.

''When that doesn't happen, inequality widens and wealth distribution is less fair,'' Mr Little said.

At a glance
• Workforce participation rate highest ever at 69.3%

• 83,000 people added to employment force in year to March

• Population growth and immigration drives participation rate

• Unemployment remains high at 6%

• Average ordinary time hourly earnings rise 2.5% to $28.18


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