N.Z. Jobless Rate Rises to 3.9%

New Zealand's jobless rate rose in the second quarter to the highest in more than two years as companies, facing increasing costs and slowing profits, were unable to find jobs for a surge in people seeking work.
TradingEconomics.com, Bloomberg 8/6/2008 7:11:35 PM

The unemployment rate increased to 3.9 percent from a revised 3.7 percent in the previous three months, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. The median estimate of 13 economists surveyed by Bloomberg News was for a jobless rate of 3.8 percent.

Rising unemployment adds to sign that New Zealand's economy was in a recession in the first half of 2008, which will ease inflation and allow the central bank to lower interest rates. Reserve Bank Governor Alan Bollard last month cut the official cash rate for the first time in five years and said further reductions are likely as demand slows.

The number of people working or seeking work increased 33,000 to a record 2,257,000, while the number of people not looking for employment or unavailable to work fell 26,000.

The participation rate, which measures the proportion of the population working or seeking employment, rose to 68.6 percent from 67.7 percent in the first quarter.

Employment rose 1.2 percent, or about 26,000 jobs, in the second quarter after companies shed 27,000 jobs in the previous three months, the most in 19 years.

Economists expected the economy added about 3,300 jobs as falling business confidence made them reluctant to hire workers.

Company profit expectations fell to a 26-year low in the second quarter, according to a report from the New Zealand Institute of Economic Research Inc. More firms planned to cut costs and fire workers, according to a survey of 923 companies.

Demand for labor has waned after the economy contracted 0.3 percent in the first quarter, putting New Zealand on the brink of its first recession since 1998. The Treasury Department said Aug. 4 the economy probably also shrank in the second quarter.

Air New Zealand Ltd., the nation's biggest airline, said last month it may not replace people who leave non-essential roles as demand for seats slows amid high fuel costs. The company said in May that full-year profit will fall as costs rise.

The highest unemployment rate since March 2006 will ease pressure on wages and slow spending, justifying Bollard's decision to cut borrowing costs. Wages for non-government workers rose 3.5 percent in the year ended March 31, less than the 3.6 percent pace forecast by economists, the statistics agency reported on Aug. 4.

Total actual hours worked gained 2.3 percent from the first quarter and 1.1 percent from a year earlier.

Full-time employment rose by 17,000 jobs, or 1 percent, in the second quarter after seasonal adjustments. Part-time employment increased by 8,000 jobs, or 1.6 percent. Statistics New Zealand adjusts the full-time and part-time employment figures separately, which means they may not add to the total change in employment.

N.Z. Jobless Rate Rises to 3.9%