New Zealand’s Unemployment Rate rises to 5.2% in Q2 vs. 5.3% expected

Lallalit Srijandorn FXStreet

New Zealand’s Unemployment Rate rose to 5.2% in the second quarter (Q2) from 5.1% in the first quarter, according to the official data released by Statistics New Zealand on Wednesday. The figure came in below the market consensus of 5.3%.

Furthermore, the New Zealand’s Employment Change arrived at -0.1% in Q2 from an increase of 0.1% in Q1, compared with the consensus forecast of -0.1%. The participation rate in New Zealand decreased to 70.5% in Q2, compared to 70.8% in the previous reading.

Statistics New Zealand labour market spokesperson Jason Attewell said with the key highlights noted below

Labour market conditions have changed considerably in the last few years. Since the June 2022 quarter, the unemployment rate has risen by 1.9 percentage points.

The underutilisation rate has risen by 3.5 percentage points over the same period.

Market reaction to the New Zealand’s employment data

At the time of writing, the NZD/USD pair is trading 0.04% lower on the day to trade at 0.5900.

Employment FAQs

How do employment levels affect currencies?

Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

Why is wage growth important?

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

How much do central banks care about employment?

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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