New Zealand Employment Falls

New Zealand's jobless rate rose and employment fell buy the most in 19 years in the first quarter as plunging business confidence prompted companies to fire workers, adding to signs economic growth has stalled., Bloomberg 5/7/2008 4:10:10 PM

The unemployment rate increased to 3.6 percent from 3.4 percent in the previous three months, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. Employers shed 28,000 workers in the quarter, more than 10 times the decline expected by economists.

Reserve Bank Governor Alan Bollard last month cited the strength in the labor market as a source of inflation and a reason for leaving the official cash rate at a record high of 8.25 percent. Fewer jobs and rising unemployment suggest wages will slow this year, reducing price pressures in the economy and leading to lower borrowing costs.

Business confidence slumped to a 33-year low in the first quarter, according to a survey by the New Zealand Institute of Economic Research. Twenty percent of firms said they may fire workers in the second quarter as costs rise and profits fall.

Wages for non-government workers rose 0.7 percent in the first quarter, less than the 0.9 percent pace forecast by economists, the statistics agency reported on May 5.

Slowing wage growth and rising unemployment is eroding consumer confidence, which was at a 10-year low in the first quarter, suggesting households are likely to stop spending and economic growth is slowing.

Ebert expects gross domestic product increased just 0.1 percent in the first quarter. Growth will be 1.5 percent in 2008, the slowest pace in a decade, according to the median forecast of 10 economists surveyed by Bloomberg. Growth was 3.1 percent in 2007.

About half the fall in jobs was in the retail industry, the statistics agency said, citing unadjusted figures.

Consumer prices surged 3.4 percent in the first quarter from a year earlier, exceeding Bollard's target, as fuel and food costs increased.

Employment fell 1.3 percent from the fourth quarter, the most since the first quarter of 1989, today's report showed. Employment fell 0.2 percent from a year earlier, the first annual decline since 1998.

The number of people working or seeking work declined 24,000 to 2,222,000, while the working age population increased. The number of people not looking for work or unavailable to work rose 35,000 to a record. Total actual hours worked fell 1.9 percent from the fourth quarter and dropped 1.6 percent from a year earlier, the biggest annual decline since 1991.

New Zealand Employment Falls