WELLINGTON, Feb 4 (Reuters) - New Zealand's jobless rate surged unexpectedly to a 10-year high in the December quarter, backing views the central bank will hold rates until around the middle of the year and sending the currency tumbling.
Employment fell by 0.1 percent in the fourth quarter, sending the jobless rate to 7.3 percent, official data showed on Thursday.
The unemployment rate hit its highest since the June quarter 1999. Economists in a Reuters poll had forecast a jobless rate of 6.8 percent, and employment to fall 0.1 percent.
The increase in unemployment was mainly due to a rise in the number of people entering the labour force but unable to find work.
'It's reinforcing to the RBNZ that wage pressures will remain muted, and they'll be comfortable with the on hold until the middle of 2010 view. It's skewing the risks to a June rise,' said ASB Bank chief economist Nick Tuffley.
The New Zealand dollar slipped nearly three-quarters of a cent to a six-week low of $0.6988 before settling around $0.7000. Implied yields on bank bill contracts and swap yields also fell sharply by as much as 12 basis points as investors scaled back the chances of an early rate rise.
Financial markets quickly shifted their pricing for the first rate hike to June from April, and about 171 basis points of tightening over the next 12 months, down from 191 basis points early this week.
Last week, the central bank held the benchmark cash rate at a record low 2.5 percent and planned to keep it there until around the middle of the year, countering market speculation of an earlier hike.
Recent retail sales, house sales and prices, consumer and business confidence data have pointed to a slow rebound in the economy while inflation remained benign, easing the pressure for the central bank to tighten monetary policy quickly.
The data showed the economy shed 2,000 jobs in the construction and services sectors, with full time employment down 0.3 percent and part time jobs up 0.1 percent.
The participation rate rose to 68.1 percent from 68 percent in the previous quarter.
New Zealand's unemployment rate is lower than the 8.6 percent average for member countries of the Organisation for Economic Co-operation and Development. It is well below the 10 percent in the United States but higher than Australia's 5.7 percent.
The jobless rate hit a 22-year low of 3.4 percent in the December 2007 quarter, and the tight labour market and resulting wage pressures were factors in the central bank lifting rates to a record high of 8.25 percent to contain inflation, before it started its easing cycle in July 2008.
Finance Minister Bill English said this week there are signs unemployment is nearing its peak -- official forecasts expect around 7 percent -- although it was unlikely to drop quickly, as people worked fewer hours to conserve their jobs. The central bank sees it peaking at 6.6 percent by March this year.
The quarterly labour cost and employment survey, released earlier in the week, showed wages grew at their slowest pace in nine years in the December quarter while the jobs market stayed weak.
((mantik.kusjanto@thomsonreuters.com; +64 4 471 4232; Reuters Messaging: mantik.kusjanto.reuters.com@reuters.net)) Keywords: NEWZEALAND ECONOMY/JOBS (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. 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.
Employment fell by 0.1 percent in the fourth quarter, sending the jobless rate to 7.3 percent, official data showed on Thursday.
The unemployment rate hit its highest since the June quarter 1999. Economists in a Reuters poll had forecast a jobless rate of 6.8 percent, and employment to fall 0.1 percent.
The increase in unemployment was mainly due to a rise in the number of people entering the labour force but unable to find work.
'It's reinforcing to the RBNZ that wage pressures will remain muted, and they'll be comfortable with the on hold until the middle of 2010 view. It's skewing the risks to a June rise,' said ASB Bank chief economist Nick Tuffley.
The New Zealand dollar slipped nearly three-quarters of a cent to a six-week low of $0.6988 before settling around $0.7000. Implied yields on bank bill contracts and swap yields also fell sharply by as much as 12 basis points as investors scaled back the chances of an early rate rise.
Financial markets quickly shifted their pricing for the first rate hike to June from April, and about 171 basis points of tightening over the next 12 months, down from 191 basis points early this week.
Last week, the central bank held the benchmark cash rate at a record low 2.5 percent and planned to keep it there until around the middle of the year, countering market speculation of an earlier hike.
Recent retail sales, house sales and prices, consumer and business confidence data have pointed to a slow rebound in the economy while inflation remained benign, easing the pressure for the central bank to tighten monetary policy quickly.
The data showed the economy shed 2,000 jobs in the construction and services sectors, with full time employment down 0.3 percent and part time jobs up 0.1 percent.
The participation rate rose to 68.1 percent from 68 percent in the previous quarter.
New Zealand's unemployment rate is lower than the 8.6 percent average for member countries of the Organisation for Economic Co-operation and Development. It is well below the 10 percent in the United States but higher than Australia's 5.7 percent.
The jobless rate hit a 22-year low of 3.4 percent in the December 2007 quarter, and the tight labour market and resulting wage pressures were factors in the central bank lifting rates to a record high of 8.25 percent to contain inflation, before it started its easing cycle in July 2008.
Finance Minister Bill English said this week there are signs unemployment is nearing its peak -- official forecasts expect around 7 percent -- although it was unlikely to drop quickly, as people worked fewer hours to conserve their jobs. The central bank sees it peaking at 6.6 percent by March this year.
The quarterly labour cost and employment survey, released earlier in the week, showed wages grew at their slowest pace in nine years in the December quarter while the jobs market stayed weak.
((mantik.kusjanto@thomsonreuters.com; +64 4 471 4232; Reuters Messaging: mantik.kusjanto.reuters.com@reuters.net)) Keywords: NEWZEALAND ECONOMY/JOBS (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. 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.