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New Zealand – Rising labour costs a good sign

08 May 2013

New Zealand labour costs rose in the first quarter and filled jobs increased, according to the Household Labour Force Survey..

Private sector ordinary time wages rose 0.4% in the first three months of the year from the fourth quarter of 2012, and gained 1.8% from the first quarter last year, Statistics New Zealand said on Tuesday.

Economists are looking for some improvement in the labour market after a weak fourth quarter when the participation rate fell to the lowest in almost nine years and employment shrank -1%. Figures in March showed the economy grew +1.5% in the final quarter of 2012.

The labour cost index for the first quarter was expected to hold at the fourth-quarter's 0.5% pace, according to a Reuters survey.

"Today's labour market reports were on the soft side of both market expectations and our own," said Felix Delbruck, senior economist at Westpac Banking Corp. "They confirmed that inflation pressure remains localised and subdued overall, and will leave the RBNZ comfortable keeping the OCR on hold for now."

Total ordinary time wages also rose 0.4% from the previous quarter to be 1.8% up from a year earlier.

Separately, the quarterly employment survey showed private sector ordinary time average hourly earnings rose +1% in the first quarter and were up +2.3% from a year earlier. Public sector earnings rose +1.6% in the quarter and +1.4% in the year while total hourly earnings excluding overtime were up +0.8% and +2.1% respectively.

Total filled jobs rose +0.4%, seasonally adjusted, from the previous quarter and rose +1.7% from a year earlier. Seasonally adjusted total paid hours were unchanged in the quarter and rose +2.3% from a year earlier.

Tuesday's figures are the first leg on this week's employment releases, with the detailed Household Labour Force Survey due on Thursday. That's expected to show the unemployment rate fell to 6.8% from 6.9% while jobs growth climbed 0.8% and the participation rate edged up to 67.8%.

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