NZ: Unemployment to remain at 5.2% as labour force participation continues to rise - Westpac

Satish Ranchhod, Senior Economist at Westpac, explains that while the New Zealand’s employment is expected to remain firm in the March quarter, there are a few more questions around what will happen to the unemployment rate.

Key Quotes

“Last quarter unemployment picked up to 5.2% in the face of firm employment growth. That was due to an increase in the labour force participation rate, which rose to a record high of 70.5% in the December quarter.”

“Labour force participation has risen strongly over the past year, underpinned by strong net migration, as well as firm economic conditions that have encouraged people to enter the labour force. These conditions have continued in the early part of 2017, and we expect that the participation rate will nudge higher again in March to 70.6%.”

“This continued growth in the labour force has (for now) provided a floor under the unemployment rate. Consequently, we expect that the unemployment rate will remain unchanged at 5.2% in March, despite continued firm jobs growth. Over time, we still expect that the unemployment rate will trend down, consistent with firm economic conditions.”

“The participation rate is a key area of risk around our forecasts. After some large increases in in recent quarters, there is a chance that participation pulls back in March. If this did happen, we could see the unemployment rate pushing down.”