New Zealand’s Q2 employment report remains mostly robust, likely to provide relief to RBNZ: Westpac Research

Labour market conditions were generally firmer in the June quarter. Jobs growth was robust, though the unemployment rate ticked up slightly. With the economy moving closer to full capacity, the first signs of a stirring in wage growth are finally emerging.

While the results were stronger than what was expected, they were largely in line with the Reserve Bank of New Zealand’s (RBNZ) forecasts in its May Monetary Policy Statement. The only aspect that fell short was the rise in the unemployment rate, and that was well within the margin of error for this survey.

"We think the RBNZ will be satisfied with both its contribution to “supporting maximum sustainable employment” – as specified in its new dual mandate – and with the evidence that inflation pressures are gradually picking up as intended," Westpac Research commented in its latest report.

Meanwhile, the labour market figures are perhaps best seen as a corrective to the pessimism seen in recent business confidence surveys. Growth in activity has slowed from its peak, but businesses have remained open to hiring. And while wage growth has picked up, it’s not spiralling higher in the way that businesses seem to fear.