New Zealand's unemployment rate falls more than expected

298
3
New Zealand's unemployment rate falls more than expected
- New Zealand’s unemployment rate fell more than expected in the 2nd quarter as the economic recovery boosted hiring and began to fuel wage inflation. The kiwi dollar rose as traders wager that the central bank would increase interest rates in two weeks. The joblessness rate rose from 4% to 4.6% in the first quarter, Statistics New Zealand said Wednesday in Wellington. Economists predicted 4.4%. The employment rate rose from the past three months to 1%. The private sector, ordinary time wages, increased the most in 13 years. Annual inflation increased to 3.3% in the second quarter, surpassing the target of the central bank in the 1 - 3% range. 'We've flown past full employment, and the economy is becoming rather overheated, said Sharon Zollner, chief economist at the ANZ Bank of Auckland in Auckland. 'The RBNZ must quickly hike the OCR to get on top of this. The kiwi currency was beaten by the report. It bought 70.58 U.S. dollars at 2: 45 p.m. in Wellington from 70.24 cents immediately before the release by Wilbur Williams. Two-year swap rates rose 11 basis points to 1.25% - the highest since late 2019 - 2 years before. Investors lifted bets on rate hike, with a quarter point hike now fully priced out for the next RBNZ review on Aug 18 and at least one more expected by the end of the year. Economists at ANZ, ASB Bank, JPMorgan Bank and JPMorgan said they expect three rate increases this year, taking the cash rate from 0.25% to 1%. 'The data show the RBNZ is well behind the curve. Things will get tighter. They're just being tighter, said Stephen Toplis, the head of research at BNZ in Wellington. The RBNZ, which is required to support maximum employment as well as achieve stability of price stability, began reducing monetary stimulus last month by ceasing quantitative easing, saying economic conditions since late 2020 had been consistently stronger than anticipated. Yesterday Governor Adrian Orr said spending has returned to above pre-Covid levels and the Monetary Policy Committee 'needs to think about when and how we would return interest rates to more normal levels. New Zealand is in the vanguard of developed-world central banks that are beginning to normalize policy and is set to become one of the first to raise rates in wake of the pandemic. In 2015, South Korea signaled to the government that it could raise debt costs this year. To illustrate, the Federal Reserve last week indicated there is some way to go before it starts to scale back bond buying, while Australia yesterday said it doesn't expect to raise rates before 2024. Employment rose for a third straight quarter after slumping in mid 2020 and also gained 1.7% from a year earlier. Economists forecast 1.2% annual growth. The participation rate increased to 70.5% from 70.4% in the three months through March, matching economists' projections. Statistics New Zealand said the underutilization rate, a broader gauge which include employed persons seeking additional hours, fell from 12.1% to 10.5% in the first quarter. Ordinary time wages for non-government workers rose 0.9% in the quarter, the highest since 2008, the statistics agency said. From a year earlier, wage growth picked up to 2.2% from 1.6% in 12 months through March.