The New Zealand dollar fell Thursday after a sharp drop in the number of people employed in the fourth quarter added to the view the Reserve Bank of New Zealand won’t be hiking interest rates any time soon.
Seasonally adjusted employment fell 1.0% on the quarter, against expectations for a 0.4% rise, and fell 1.4% on the year, against expectations for a 0.3% rise. And while the seasonally adjusted unemployment rate dropped to 6.9% in the fourth quarter from 7.3% in the third, “it is still 0.5 percentage points higher than a year ago,” Diane Ramsay, industry and labor statistics manager at Statistics New Zealand said in a statement.
The New Zealand dollar was at $0.8381 at 0002 GMT, compared with US$0.8428 prior to the release.
“While you can slice and dice the labour picture a number of ways, weak employment and signals of a strong discouraged worker effect suggests a weak job market…the Official Cash Rate is firmly on hold despite some housing-centric nuances suggesting otherwise,” Sharon Zollner, senior economist at ANZ Bank, said.
Unemployment has been a key concern for the economy as it struggles with tepid economic growth, in particular after a series of earthquakes in Christchurch. While economists expect the labor market to improve as the rebuild there picks up pace, it is likely to remain soft in the near term. The Reserve Bank of New Zealand has left its benchmark interest rate at 2.50% since March 2011 and, given the moderate economic recovery to date, economists are widely expecting it will remain on hold until December 2013 at the earliest.
“The reported weakness in employment–the second negative surprise in a row–will reinforce that interest rates are on hold for a while further,” said ASB Economist Daniel Smith. The labor participation rate was 67.2% in the fourth quarter, below economists expectations for an unchanged rate of 68.4%.