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Unemployment in New Zealand continued to increase amid slowing recovery

Wed, Nov 4 2009, 23:21 GMT
by ecPulse.com analysis team

ecPulse.com

Unemployment in New Zealand continued to increase reaching the highest in about nine years in the third quarter of this year amid slowing recovery and weak business investments. The nation's labor market still deteriorating despite the economy grew in the second quarter for the first time in more than a year.

New Zealand statistics said today that unemployment rate rose to 6.5% in the third quarter of this year compared with a previous 6.0%, and it came higher than analyst's estimates of 6.4%.

Employment change declined 0.8% in the quarter ended September from the previous quarter following a decline by 0.4% and it came worse than the forecasted 0.3%, while on the yearly record it fell 1.8% in 3Q coming after a decline by 0.9%, and it was expected to drop 1.3%.

However, more deterioration in New Zealand labor market are expected after the Finance Minister Bill English said yesterday that unemployment rate is expected to peak 7% by mid 2010, while the government said in May that jobless rate will increase to 8%.

The labor sector didn’t respond to the slowing recovery witnessed in New Zealand as the economy expanded 0.1% in the second quarter of this year ending a series of contractions started in the first quarter last year. Exports showed signs of recovery but it is still not enough for New Zealand companies to start thinking of hiring more workers and the option left is asking workers to work additional hours.

Today's report showed that actual hours worked dropped for the fifth straight quarter declining 0.7% which is the lowest level in four years. As for wages for non government workers, it rose 0.4% in the three months to September. Full time employment declined 0.5% falling 9,000 jobs, while part time employment fell 1.1% falling 5,000 jobs.

The Reserve Bank of New Zealand left interest rates unchanged this month to remain at the low record of 2.50% hoping to stimulate economic recovery that appeared to be weak. The bank said that there is not "urgency" to end monetary policy stimulus at the current stage as the economy still needs more support from interest rates.

Monetary policy makers needs to provide more support for the business sector through low borrowing costs especially that the reserve bank said in its report this month that business spending remains weak and credit growth is subdued. Low borrowing costs is expected to help the business sector to pick up that should be reflected on the labor market as more workers shall be hired.

Today's report is indicating that retail sales may weaken in the upcoming period along with weak household spending as they were pressured to cut purchases amid low income levels, worth mentioning that retail sales rose 1.1% in August following a decline by 0.5% in July.

The New Zealand dollar fell against its American counterpart and other major currencies after the release of today's report. The NZD traded around 0.7238 against the dollar at 23:00 GMT, while it traded around 2.0531 against the euro and around 2.2864 against the royal pound.

Published on  Wed, Nov 4 2009, 23:22 GMT