New Zealand job market data were better than expected, but the Unemployment Rate rose 0.1%pt to 4.5%, due to slightly higher labor force participation. The participation rate was broadly flat at the high level of 70.9%. That, plus a 0.5% q/q increase in the working-age population, means labor demand was matched by solid growth in labor supply. The participation rate can be noisy – looking through this, the labor market is tracking broadly sideways.
The labor market remains tight. The unemployment rate at 4.5% is close to estimates of full employment, consistent with firms experiencing difficulty in finding skilled labor. The underutilization rate ticked up to 12.0% and remains historically high. This high level may imply that there is more spare capacity available in the labor market than the unemployment rate alone suggests, with employees willing to work more. Or it could be a symptom of mismatch of employers' needs and workers' skills or location. The labor market is expected to tighten further, but only modestly, given the weakness in forwarding indicators of labor demand, such as employment intentions in our business confidence survey.
Wage growth has accelerated from 0.3% to 0.6% last quarter, even after accounting for Government mandated pay increases.
In conclusion, today's reports will provide some comfort to the Reserve Bank of New Zealand that the economy is on track for both full employment and a gradual return to the inflation target.
Let's now take a look at the NZD/USD technical picture at the H4 time frame. The market remains locked in a horizontal consolidation zone between the levels of 0.6765 - 0.6831. The market conditions remain neutral, with a slight bias to the downside as indicated by the RSI direction. Any violation of the level of 0.6765 will open the road towards the next support at 0.6711. On the other hand, any violation of the level of 0.6851 will open the road towards the level of 0.6856.
