NZ Employment Preview: Forecasts from four major banks, another record low

Stats NZ is set to release employment figures for the first quarter on Tuesday at 22:45 GMT and as we get closer to the release time, here are forecasts from economists and researchers at four major banks regarding the upcoming labour market data.

The Unemployment Rate is expected to have stayed unchanged at 3.2% while the Employment Change is seen at 0.1%.

Westpac

“We expect the unemployment rate to fall to 3.0% in the March quarter. This would be another new low in the history of the survey going back to 1986. Labour market indicators point to a further tightening in the market in recent months, albeit with some disruptions from the Omicron wave. We expect a further acceleration in wage growth, albeit still falling short of the surge in consumer price inflation. Our forecast would represent a modest upside surprise to the Reserve Bank’s view – something that was perhaps already anticipated in this month’s decision to lift the OCR by 50 basis points in one go.”

ANZ

“We’ve pencilled in a further decline in the unemployment rate to 3.1% in Q1 (versus 3.2% in Q4). However, the Omicron wave peaked in Q1, so the data could be a little noisy. Looking through near-term volatility, we think the labour market will continue to tighten over the first half of 2022. Wage inflation has thus far failed to keep up with the rapidly rising cost of living. But with labour market tightness so widespread, we do expect wage growth to accelerate sharply over 2022. Private sector average hourly earnings are expected to have risen 1.2% q/q in Q1 (4.6% YoY), and we expect labour costs were up 0.6% QoQ (3.0% YoY). The tight labour market is likely to be a significant source of domestic inflation pressure over 2022, as firms increasingly bid up wages to attract and retain talent. For the RBNZ, that means they need to continue on with aggressive interest rate hikes (including a 50bp hike in May) in order to bring surging domestic inflation pressures to heel.”

TDS

“We expect the unemployment rate to mark a new low in the series given the strength in the labour market while wages are likely to gain and reach its highest annual growth rate since Q4'08 at 3.2% YoY. A strong Q1 labour market print will support our call for the RBNZ to continue with its ‘stitch-in-time’ approach and aggressive tightening stance, hiking by 50bps in May.”

Citibank

“Citi unemployment rate forecast; 3.2%, Previous; 3.2%; Citi employment change forecast; 0.1%, Previous; 0.1%; Citi participation rate forecast; 71.1%, Previous; 71.1%; Citi private sector wages forecast; 0.7%, Previous; 0.7%. We expect private sector wage costs to rise by 0.7% in the quarter. This would be in-line with the gains in the previous two quarters but take the YoY increase from 2.8% to 3.1%.”