ZB

Wage growth soars as unemployment holds steady at record low

Author
Liam Dann, NZ Herald,
Publish Date
Wed, 4 May 2022, 11:38am
Workers are in demand as unemployment dips. April 2022 NZ Herald Photo by Alex Burton.
Workers are in demand as unemployment dips. April 2022 NZ Herald Photo by Alex Burton.

Wage growth soars as unemployment holds steady at record low

Author
Liam Dann, NZ Herald,
Publish Date
Wed, 4 May 2022, 11:38am

The official unemployment rate has held steady at 3.2 per cent for the March quarter.

But wage growth soared in the quarter.

Annual wage inflation measured by the labour cost index (LCI) rose to per cent in the March 2022 quarter, up from 2.6 per cent in the December 2021 quarter, Stats NZ said today.

"Wage inflation is at its highest level since the March 2009 quarter," business prices delivery manager Bryan Downes said.

In the year to the March 2022 quarter, average ordinary time hourly earnings, increased to $36.18 - up 4.8 per cent.

Average weekly earnings (including overtime) for full-time equivalent employees in the also increased on an annual basis – up 5.7 percent to $1,406.12.

While wages had increased more quickly over the past year, annual consumer price inflation had exceeded annual wage inflation for the last four quarters, StatsNZ noted.

The consumers price index (CPI) increased 6.9 per cent in the year to the March 2022 quarter.

"Wage increases have typically exceeded consumer price increases over the past ten years," Downes said. "In the last four quarters, despite stronger wage growth, wage inflation has been lower than consumer price inflation."

"However, because the adjusted LCI measures changes in the cost of labour for businesses, this comparison contrasts changes in labour costs to changes in consumer prices – it is not a direct comparison of wages and cost of living."

The figures have been released with latest employment and wage inflation figures, based on StatsNZ's long running Household Labourforce Survey (HLF) Quarterly Employment Survey.

The measures of wage growth were ahead of what we and the market expected, said Westpac chief economist Michael Gordon.

"For the Reserve Bank, the wage inflation measures are where the rubber meets the road, so in that respect today's figures present a moderate upside surprise relative to the RBNZ's February forecasts," he said.

"That underscores the decision to accelerate the pace of monetary tightening at the April review, and leaves us comfortable with our forecast of another 50 basis point OCR hike at the May review."

Unemployment was already sitting at 3.2 per cent for the December quarter, the lowest since the data series began in 1986.

Employment grew by just 0.1 per cent in the March quarter, according to the Household Labour Force Survey.

That was backed by the Quarterly Employment Survey, which showed a 0.3 per cent rise in filled jobs, after some very strong growth in the previous three quarters.

Omicron disruptions may have been a factor in the pace of hiring during the quarter, though the greater impact appears to have been on the number of hours worked compared to normal, which was down 0.2 per cent, Westpac's Gordon said.