New Zealand's Jobless Rate Hits Four-Year High Amid Economic Slowdown
New Zealand's unemployment rate reached a four-year peak at the end of 2023 as hiring slowed in the wake of a sharp economic contraction.
Unemployment climbed to 5.1% in the fourth quarter, up from 4.8% in the third quarter, according to Statistics New Zealand. Employment declined by 0.1%, less than the expected 0.2% drop, while annual wage inflation slowed for the seventh consecutive quarter.
The weakening labor market provides the Reserve Bank of New Zealand (RBNZ) with room to continue cutting interest rates, which is expected to foster a modest economic recovery in 2024.
"The labor market is expected to soften further given the subdued economic outlook and cost-cutting efforts by businesses struggling with profitability," said Mark Smith, senior economist at ASB Bank in Auckland.
The RBNZ has already reduced the official cash rate (OCR) by 125 basis points since August. Policymakers have indicated that they will deliver a third consecutive 50-point cut at their next meeting on February 19, bringing the OCR to 3.75%.
The unemployment rate is the highest since the third quarter of 2020. The RBNZ had forecast a rate of 5.1% in November.
Employment fell by 1.1% on an annual basis, the largest annual decline since 2009. The participation rate eased to 71% from 71.1%.
New Zealand's annual inflation rate remained steady at 2.2% in the fourth quarter, near the midpoint of the RBNZ's 1-3% target band. Wage growth is expected to continue slowing and alleviate inflationary pressures.