3 Feb 2011

Dollar dumped after jobless rate rise

9:28 pm on 3 February 2011

Investors dumped the New Zealand dollar on Thursday after Statistics New Zealand reported that the jobless rate rose sharply to 6.8% at the end of last year.

Three months before, the seasonally adjusted rate was 6.4%.

Altogether, 158,000 people were out of work in the final three months of last year, up from 150,000 at the end of September.

That is barely changed from the 7% figure when unemployment peaked at the end of 2009.

The dollar dropped half a cent against the greenback, with investors expecting the Official Cash Rate to remain unchanged for longer. It finished the day at US77.11 cents

The Council of Trade Unions and at least one bank economist now believes the Reserve Bank should reduce interest rates.

During the December quarter, 14,000 part-time jobs disappeared, a fall of 2.8% during the period. Full-time jobs rose 0.3%, resulting in a slight increase in the number of hours worked.

The unemployment rise occurred despite less competition for jobs, as 3000 people left the workforce.

Prime Minister John Key says people shouldn't read too much into the latest figures. Mr Key says the figures are volatile and he Is confident the jobless rates will drop in 2011.

Mr Key says the economy in the second half of 2010 was flat, and the figures show the need for the Government's efforts to take pressure off interest rates, reduce debt and build the economy.

He says the Treasury is confident the unemployment rate peaked at 7%.

Labour Party spokesperson Annette King says the figures show New Zealand is going backwards, and the Government should stop making excuses and come up with ideas to create jobs.

The Green Party says the Government could cut rising unemployment by building more state houses.

Co-leader Metiria Turei says unemployment is hurting families and widening the gap between the haves and have-nots. She says the Government lacks a coherent plan to tackle the problem.

Ms Turei says the Greens' solution is to build 6000 state houses, which would create 28,000 jobs and give life to a building sector which is under severe strain.

But Senior Westpace Dominic Stephens said he expected the economy to perform better this year. It would take a few more months for economic indicators to show a marked improvement, he said.