30 Apr 2012

Little change predicted in Q1 unemployment rate

7:00 am on 30 April 2012

Most economists are expecting little change in the unemployment rate for the first three months of the year, with hours worked and wage growth also remaining subdued.

The official unemployment rate is published on Thursday, while the Labour Cost Index and Quarterly Employment Survey, which measure hours worked and wage inflation, are out on Tuesday.

Unemployment in the final three months of last year fell 0.2% to 6.3%.

Westpac chief economist Dominick Stephens believes unemployment will fall a fraction to 6.2%, and will continue to fall once the Canterbury rebuild is fully underway.

He says the labour market in New Zealand is fairly stagnant as the economic recovery has so far progressed quite slowly.

Mr Stephens says there are signs firms are intending to hire more people and there's demand for labour in Canterbury with the rebuild getting underway.

"So over the course of the next year or so we do expect unemployment to drift slightly lower as the economy accelerates", he says.

But Goldman Sachs an economist Philip Borkin believes unemployment will tick higher to 6.4% in March, and he doesn't think the Canterbury rebuild alone will be enough to push it back down.

He believes there's a reasonable chance that the unemployment rate will rise modestly in the quarter after considering the leading market indicators, such as job vacancies, benefit numbers and Statistics New Zealand's national employment indicator.

Mr Borkin says the Christchurch rebuild will draw in resources and provide a boom to certain sectors of the economy.

"I think it will certainly boost the demand for builders of course, but it's unlikely to really flow through to other parts of the economy. We need to see a continuation of balance sheet repair and an improvement in the global economy before we really see the labour market in New Zealand improve strongly", he says.

Mr Borkin expects wages to have grown by 0.5% last quarter, while hours worked will remain soft.