By Gyles Beckford
WELLINGTON, Nov 6 (Reuters) - New Zealand's jobless rate rose to its highest level in nearly five years in the third quarter as the labour market started to show the effects of recession, backing views the central bank will cut interest rates further next month.
The unemployment rate rose to 4.2 percent, the highest since December 2003, as growth in the labour force outpaced growth in jobs, official data showed on Thursday.
Employment rose 0.1 percent, or around 3,000 jobs, in the September quarter, as gains in full-time employment offset losses of part-time employment.
Unemployment had hit a 22 year-low of 3.4 percent late last year.
Economists in a Reuters poll forecast the jobless rate to rise to 4.3 percent from 3.9 percent in the previous quarter and for employment to fall 0.6 percent.
The participation rate in the September quarter nudged up to 68.7 percent from 68.6 percent.
The data would not stop the central bank from lowering rates further as the labour market was set to weaken further, said ANZ-National Bank Economist Philip Borkin.
'The unemployment rate is the one to watch and it does show the labour market is turning, which will give the Reserve Bank confidence wage pressures will start to subside,' Borkin said.
Following the news, the New Zealand dollar briefly rose to $0.5984/91, from $0.5964/71 before the data, but soon dropped back with a wider theme of investor risk aversion taking precedence.
The December bank bill contract was unchanged for a yield of 6.17 percent compared with the official cash rate of 6.5 percent.
Last month, the Reserve Bank of New Zealand (RBNZ) cut its cash rate by a record 1 percentage point to 6.5 percent to support an economy in recession and cushion the impact of global financial turmoil.
The tight labour market has previously been a major concern for the central bank because it was pushing up labour costs and fuelling inflation pressures.
Last month the RBNZ noted that wages remained a factor in keeping domestic inflation pressures 'stubbornly high'.
Data on Monday showed the key private sector labour cost index rose a record 3.7 percent in the year to Sept. 30, though analysts said that was likely to mark a peak in wage pressures.
A survey of businesses by the New Zealand Institute of Economic Research last month showed a net 11 percent of respondents cutting jobs in the third quarter, while a net 7 percent planned to cut staff over the next three months.
(Editing by James Thornhill) Keywords: NEWZEALAND ECONOMY/JOBS (gyles.beckford@reuters.com ; +64 4 471 4231; Reuters Messaging: gyles.beckford.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WELLINGTON, Nov 6 (Reuters) - New Zealand's jobless rate rose to its highest level in nearly five years in the third quarter as the labour market started to show the effects of recession, backing views the central bank will cut interest rates further next month.
The unemployment rate rose to 4.2 percent, the highest since December 2003, as growth in the labour force outpaced growth in jobs, official data showed on Thursday.
Employment rose 0.1 percent, or around 3,000 jobs, in the September quarter, as gains in full-time employment offset losses of part-time employment.
Unemployment had hit a 22 year-low of 3.4 percent late last year.
Economists in a Reuters poll forecast the jobless rate to rise to 4.3 percent from 3.9 percent in the previous quarter and for employment to fall 0.6 percent.
The participation rate in the September quarter nudged up to 68.7 percent from 68.6 percent.
The data would not stop the central bank from lowering rates further as the labour market was set to weaken further, said ANZ-National Bank Economist Philip Borkin.
'The unemployment rate is the one to watch and it does show the labour market is turning, which will give the Reserve Bank confidence wage pressures will start to subside,' Borkin said.
Following the news, the New Zealand dollar briefly rose to $0.5984/91, from $0.5964/71 before the data, but soon dropped back with a wider theme of investor risk aversion taking precedence.
The December bank bill contract was unchanged for a yield of 6.17 percent compared with the official cash rate of 6.5 percent.
Last month, the Reserve Bank of New Zealand (RBNZ) cut its cash rate by a record 1 percentage point to 6.5 percent to support an economy in recession and cushion the impact of global financial turmoil.
The tight labour market has previously been a major concern for the central bank because it was pushing up labour costs and fuelling inflation pressures.
Last month the RBNZ noted that wages remained a factor in keeping domestic inflation pressures 'stubbornly high'.
Data on Monday showed the key private sector labour cost index rose a record 3.7 percent in the year to Sept. 30, though analysts said that was likely to mark a peak in wage pressures.
A survey of businesses by the New Zealand Institute of Economic Research last month showed a net 11 percent of respondents cutting jobs in the third quarter, while a net 7 percent planned to cut staff over the next three months.
(Editing by James Thornhill) Keywords: NEWZEALAND ECONOMY/JOBS (gyles.beckford@reuters.com ; +64 4 471 4231; Reuters Messaging: gyles.beckford.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.