NZ Labour Market Preview: Forecasts from four major banks, unemployment around record low

New Zealand is set to report its employment figures for the fourth quarter on Tuesday, January 31 at 21:45 GMT and as we get closer to the release time, here are forecasts from economists and researchers at four major banks regarding the upcoming labour market data.

Unemployment is expected to remain steady at 3.3%. Economists also update their rate hikes expectations based on the labour market data.  

ANZ

“Unemployment is forecast to dip 0.1ppt to 3.2% thanks to a 0.3% QoQ (1.5% YoY) lift in employment. But the whims of quarterly volatility in the HLFS data mean it will be hard to read much into the unemployment figure without the context of the wider survey. We expect wage growth continued to accelerate, with labour remaining the biggest constraint facing firms in Q4. We think private sector average hourly earnings (ordinary time) were up 1.9% QoQ (9.1% YoY), and that productivity-adjusted private sector labour costs were up 1.0% QoQ (4.1% YoY). While data should confirm that the labour market ended 2022 on a high note, that doesn’t tell us much about the outlook for 2023. Forward indicators of labour demand have softened significantly in recent months, and we expect the RBNZ will downshift to a 50 bps OCR hike in February as signs of deteriorating domestic demand become increasingly established.”

Westpac

“We estimate that unemployment held steady at 3.3% for the December quarter. The tight labour market has spurred a sharp pickup in wage growth over the last year. We expect to see that continue in the latest quarter. The Reserve Bank is already braced for some very strong figures, recognising that the labour market tends to lag behind the economic cycle. We expect further OCR increases this year, although the latest’s inflation figures have tipped us towards a 50 bps rise next month rather than the 75 bps that the RBNZ signalled.” 

TDS

“We expect another firm labour market print in Q4 though we don't think it is a game-changer to nudge the RBNZ towards a 75 bps point hike after the Q4 CPI print last week squarely missed the RBNZ's forecast. However, we see a terminal rate of 5% as necessary to quell the risk of a wage-price spiral as quarterly wages growth rise and set a new record for annual wage growth.”

Citibank

“For the final labor force release of 2022, we expect jobs growth to slow in Q4. Higher official interest rates, guidance that the OCR would reach 5.50% and weaker business confidence argue for fewer new jobs being created. The participation rate should remain high, however, with solid wages growth and reported labor shortages keeping a large number of citizens in the labor force. Mechanically, we have the unemployment rate rising from 3.3% to 3.4%, but this remains historically low and below what the RBNZ considers a sustainable unemployment rate. With labor shortages, wages growth is likely to remain elevated. we forecast private sector wages growth of 1.3%, which would bring yearly wage cost inflation to 4.3%.”