New Zealand unemployment rate falls to 4% in secondquarter
- New Zealand's unemployment rate fell more than forecast in the second quarter as the economy began to recover and boosted wages inflation. The dollar of the United Kingdom rose as traders bet the central bank could increase rates in two weeks.
The jobless rate fell to 4% from a revised 5.6% in the first quarter, Statistics New Zealand said in Wellington on Wednesday. In 2010, economists expected 4.4%. Employment rose 1% in the previous three months. Private sector, ordinary time wages increased the most in 13 years.
Annual inflation surged to 3.3% in the second quarter, exceeding the 1 - 3% target range of the central bank.
'The economy is flying past full employment, and the economy is becoming quite overheated, said Sharon Zollner, chief economist of ANZ Bank New Zealand in Auckland. 'The RBNZ needs to hiking the OCR immediately to get on top of this.
Irrespective of the report, the Dollar in India grew further. It bought 70.58 U.S. cents at 2: 45 p.m. from Wellington to 70.24 cents immediately before the release. Two-year swap rates rose 11 basis points to 1.25% - the highest since late 2019 - one point, the highest since long before 2019.
Investors lifted bet on rate increases, with a quarter point hike now fully priced in for the RBNZ's next review on Aug. 18 and at least one more expected by the end of the year. Economists of ANZ, ASB Bank, Bank of New Zealand 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 are only going to get tighter, said Stephen Toplis, head of research at the BNZ Wellington. The RBNZ, which is required to support maximum employment as well as achieve price stability, began reducing monetary stimulus by discontinuing quantitative easing last month, saying economic conditions since late 2020 were consistently stronger than anticipated.
Yesterday, Governor Adrian Orr said spending sunk 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 developing economies that are beginning to normalize policy and is set to be one of first to raise rates in the wake of the Pandemic. South Korea has also signaled it could lift borrowing costs this year.
Still, Federal Reserve last week indicated there was a way to go before it starts scaling back bond buying, while Australia yesterday said it wouldn'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 had forecast 1.2% annual growth. The participation rate increased to 70.5% from 70.4% in the three months of March, corresponding economist projections said.
Statistics New Zealand said that the underutilization rate, which is a broader gauge that includes employed persons seeking additional hours, fell to 10.5% from 12.1% in the first quarter.
The figure of annual non-government pay 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 the 12 months to March.