Job numbers 'cast doubt' on future OCR cut

Today's stronger than expected job numbers add further weight against the argument for an OCR cut, economists say. 

Michael Gordon

Figures revealed unemployment was 3.9% in the September quarter, better than anticipated and ahead of Westpac's forecast of 4.6%. The figures, coupled with strong recent GDP numbers showing the fastest rise in two years, could influence the Reserve Bank against a rate cut, economists Michael Gordon said.

Gordon said the job numbers would "be important for the RBNZ, casting further doubt on any notion of the Reserve Bank reducing the OCR". 

Gordon added: "The HLFS survey can be jumpy and other measures suggest that the true picture is less extreme than the headline of unemployment suggests, but that’s still better than one might have expected if recent business confidence surveys were to be believed. Overall, the picture is one of moderate employment growth. Wage growth remains modest."

The job numbers come after the Reserve Bank introduced a new mandate to consider employment alongside its price stability mandate, when considering monetary policy.

The central bank will make its next MPS announcement tomorrow, meaning the figures will not be considered in the bank's decision. RBNZ is widely expected to keep rates at an historic low. Economists are divided over whether governor Adrian Orr will recognise recent strong inflation figures, or "look through" the numbers and maintain a dovish outlook. 

Economists at Kiwibank said the job numbers would leave Orr with an "awkward message" to give: "They have been surprised, pleasantly, on growth, inflation and now employment."

The Kiwibank economists added: "The upside surprises keep rolling in. Today, the labour market report showed a shock drop in the unemployment rate to 3.9%. Unemployment is at the lowest rate since June 2008 – confounding all forecasters. StatsNZ stands firmly behind these figures. There is no way to describe the labour survey other than, it’s on fire!"


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