New Zealand’s job market loses steam, with unemployment rising to a 15-year high of 5.2% in Q2. That is the strongest reading since the first full quarter of recovery following COVID in Q3 2020. In the second quarter , the jobless rate was 5.2%, slightly higher than 5.1% during the first three months of the year. Although the increase was below market expectations (economists predicted 5.3%), it further fuels worry about a wider economic slowdown. Employment also shrank by 0.1% during the quarter, matching analyst expectations. The drop may seem modest, but in context, it marks the latest sign that economic momentum is fading. Abhijit Surya, senior economist at Capital Economics, said the Reserve Bank was unlikely to take comfort in the slight rise in the unemployment rate, noting that a closer look at the data revealed significant slack in the labour market. The weakening labour market is emerging alongside sluggish consumer spending, contracting manufacturing and services sectors, and a languishing housing market — all of which point to a slowing economy. Participation drops as workers step back As previously pointed out, more people were jobless, and fewer people were even looking for work. The labour force participation rate — the working-age population either with a job or actively seeking employment — declined to 70.5%, down from Q1’s 70.7%. That marked the lowest level since early 2021. However, the hit has been even harder on mid-teenagers and young workers when we dig deeper into the data. Whether it was an artificial boom in the few months when workers were hard to come by during the post-pandemic hiring spike, many went into the labour market. Nonetheless, when the economy takes a hit and employers engage in less than whiplash hiring activity, these groups are often the first out of the door. Teenagers, in particular, were leaving the job market, many opting to return to school or study rather than being classed as jobless, said Michael Gordon, senior economist at Westpac in Auckland. Year-on-year, total employment fell by 0.9%, confirming that the slowdown is not just a seasonal blip, but part of a broader cooling in the economy. Workers see slower wage growth amid rising costs Adding to the unease is a continued slowdown in wage growth. According to today’s report, annual wage inflation slowed for the ninth consecutive quarter. Ordinary time wages for non-government workers rose just 2.2% compared to a year earlier — down from 2.5% in the previous quarter. That signals a diminishing bargaining power for workers, even as the cost of living remains high for many households. Despite the year-on-year slowdown, quarterly wage growth grew slightly, rising 0.6%, above economists’ expectations of 0.5%. Meanwhile, average ordinary time hourly earnings for non-government workers jumped 1.9% from the previous quarter — the strongest quarterly rise since Q3 2020. Although the rise in pay growth looked encouraging, some analysts dismissed it as potentially short-lived or a function of different types of workers making up a larger share of employment rather than broad wage inflation. Businesses may be dishing out higher wages to keep on skilled workers while pulling back elsewhere in terms of headcount. That said, real wage growth underperforms for many employees, while inflation remains elevated and still tightens household budgets. The labour market data has added weight to expectations that the Reserve Bank of New Zealand (RBNZ) will soon resume cutting interest rates. The RBNZ had forecast a 5.2% unemployment rate in May, but it also predicted employment growth of 0.2%, a clearly missed target. With inflation showing signs of easing and economic growth stalling, pressure is mounting on the central bank to support the economy. Most analysts now expect the RBNZ to cut the Official Cash Rate (OCR) by 25 basis points to 3% at its next meeting on August 20, especially after pausing in July. Want your project in front of crypto’s top minds? Feature it in our next industry report, where data meets impact.
