- New Zealand unemployment rises, wages fall
The New Zealand dollar is drifting on Wednesday, after rising 0.73% the previous day. In the North American session it is trading at 0.6104, with a rise of 0.12%.
Change in employment increases in New Zealand
New Zealand’s fourth quarter employment report indicated that the labor market remains relatively strong. Employment recovered with a 0.4% quarter-on-quarter gain, after a 0.2% drop in the third quarter. This exceeded the market estimate of 0.3%. Wage growth slowed to 3.9% year-on-year, down from 4.1% in the third quarter and above the market estimate of 3.9%. Finally, the unemployment rate rose to 4.0%, up from 3.9%, but below the market estimate of 4.0%.
It will be interesting to see how the Reserve Bank of New Zealand responds to this latest jobs data. The goal of the game for the central bank is to return inflation to the target range of between 1 and 3 percent. Wage inflation is declining and the labor market is cooling, but with inflation at 4.7%, the RBNZ will be in no rush to start lowering interest rates.
At the last meeting in November, the RBNZ warned that rates could rise and said it did not plan to lower them until 2025. However, revisions to the data have shown the economy is weaker than previously thought, which has increased expectations of rate cuts. in the second half of this year. The RBNZ has kept the cash rate unchanged at 5.5% for five consecutive times, likely meaning its steep rate tightening cycle has come to an end, despite the Bank’s warnings that rates could increase. Inflation has fallen sharply since the RBNZ began its rate tightening cycle in 2021, but remains sticky and well above the target range. The RBNZ is likely to hold rates until inflation drops further.
- There is resistance at 0.6116 and 0.6135
- 0.6081 and 0.6062 provide support