4 May 2015

Market stats expected to reflect low inflation

1:40 pm on 4 May 2015

Labour market figures out this Wednesday are expected to show there are more jobs, a strong workforce, but low wage growth.

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The labour market statistics for the first three months of the year are expected to show wages grew less than two percent, over last year.

ASB economist Chris Tennent Brown said in addition to population growth, there were also more New Zealanders re-entering the workforce, with more opportunities and strong demand for skilled workers.

"The other thing we see in an economy where the labour market is going really well, like ours has been, is people are really encouraged to re-enter the labour force as well," Mr Tennent Brown said.

He said overall number of people looking for work is likely to match the number of jobs on offer, which meant the unemployment rate was likely to remain steady at 5.7 percent.

Mr Tennent Brown said the very low inflation environment meant people were earning more in real terms.

Westpac economist Satish Ranchhod said New Zealand's low inflation rate was likely to be reflected in the labour market data, which would be of particular interest to the Reserve Bank.

"We're not expecting to see wage pressures ease back over the next few years - not with an economy that is growing at a firm pace - but we don't expect to see them to increase at rapid pace either, which will take the pressure off the Reserve Bank to increase interest rates."

Mr Ranchhod said recent surveys indicated businesses have had a good start to the year, with positive gains in retail spending and strength in the construction sector.

"Such strength is even more impressive given the headwinds in the external sector, including earlier dry conditions, falls in commodity export prices, and an elevated New Zealand dollar."

He said the number of people employed was expected to have increased by 3.3 percent in March, over the year earlier, which was likely to have pushed the annual rate of unemployment down to 5.5 percent.

"Such a strengthening in the labour market would accord with recent business surveys that have shown solid levels of hiring. It would also be consistent with the increasing number of businesses that are reporting difficulties finding suitable workers," he said.

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