New Zealand Jobless Rate Unexpectedly Fell During Lockdown

(Bloomberg) -- New Zealand's jobless rate unexpectedly fell in the second quarter as a nationwide lockdown prevented people from seeking work, and the government's wage subsidy delayed the impact of the recession on the labor market.

The jobless rate dropped to 4% from 4.2% in the first quarter, Statistics New Zealand said Wednesday in Wellington, while economists had expected a rise to 5.6%. The participation rate fell to 69.7% -- its lowest level in four years -- from a revised 70.5% in the first quarter, as more people were defined as not actively seeking work.

With the wage subsidy due to end on Sept. 1, the labor market is expected to worsen in the second half of 2020, although economists said today's data suggest the jobless rate may remain in single figures. The Reserve Bank, which targets employment as well as inflation, will assess whether the economy needs additional stimulus in its Aug. 12 policy statement.

“We still expect the unemployment rate to rise from here, but the peak may be lower than first thought,” said Mike Jones, senior economist at ASB Bank in Auckland. “Employment is still likely to undershoot the Reserve Bank's maximum sustainable employment target and the path of least regret for the bank will thus be to keep monetary policy easy.”

The kiwi dollar rose after the report. It bought 66.43 U.S. cents at 11:52 a.m. in Wellington from 66.22 cents immediately before the release.

Statistics New Zealand said that people who may have wanted work but were not actively seeking a new job during the lockdown were classified as outside the labor force rather than unemployed, which pushed the participation rate and the jobless rate lower.

Still, many of these people were captured in the underutilization measure. The gauge rose to 12% from 10.4% in the first quarter -- the biggest quarterly rise since the series began in 2004.

Employment fell 0.4% in the quarter -- less than the 2% contraction expected by economists. But hours worked fell a record 10.3% from the first quarter, adding to signs that many employees reduced output while they forced to work from home during the lockdown.

Ordinary time wages for non-government workers rose 0.2% in the quarter -- the smallest increase since 1994. Without the increase in the minimum wage on April 1, wage growth would have been flat, the statistics agency said.

From a year earlier, overall wage growth slowed to 2.1%.

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