Bloomberg News

N.Z. Jobless Rate Surges to 13-Year High, Currency Plunges

November 07, 2012

New Zealand’s unemployment rate unexpectedly rose last quarter to a 13-year high, adding to evidence of a faltering recovery and sending the best-performing Group of 10 currency this year plunging.

The jobless rate jumped to 7.3 percent from 6.8 percent in the second quarter, Statistics New Zealand said in a report today in Wellington. That’s the highest since the first quarter of 1999 and was more than the 6.7 percent median estimate in a Bloomberg survey of economists. Employment fell by 0.4 percent, or 8,000 jobs, from the second quarter, when it dropped 0.1 percent. Economists expected job growth of 0.3 percent.

The nation’s dollar tumbled to near a two-week low as investors increased bets the Reserve Bank of New Zealand will lower interest rates next month to revive demand. With the world’s major economies struggling to accelerate, the New Zealand currency’s 5.4 percent gain against its U.S. peer this year is forcing companies including Rakon Ltd. (RAK) to fire workers.

“The RBNZ has room to move and today’s report may provide the motivation,” Paul Bloxham, chief economist for HSBC Holdings Plc in Sydney, said in a research note. “The industries that were weakest were those that are most exposed to the New Zealand dollar, including manufacturing.”

The local currency bought 81.88 U.S. cents at 12:33 p.m. in Wellington from 82.62 cents immediately before the release. The so-called kiwi earlier touched 81.76 cents, the weakest level since Oct. 26.

Wheeler’s Assessment

Central bank Governor Graeme Wheeler yesterday said the exchange rate is an “issue of concern” for exporters and manufacturers who compete with imports.

The drop in employment was led by manufacturing, where hiring fell to the lowest level since June 2010, today’s report showed.

Employment fell in consecutive quarters for the first time since 2009, the statistics agency said. From a year earlier, employment was unchanged, the weakest result since a contraction in the year ended March 31, 2010.

The Reserve Bank has kept borrowing costs at a record-low 2.5 percent since March last year. Wheeler, who took over as governor in late September, signaled on Oct. 25 that the level of the official cash rate remained appropriate amid benign inflation. Yesterday, he said the monetary authority has scope to cut borrowing costs if necessary.

RBNZ Outlook

Investors priced in a 21 percent chance Wheeler will cut the benchmark rate 0.25 percentage point at the next review on Dec. 6, according to interest-rate swaps data compiled by Bloomberg at 12:33 p.m. Wellington time. That’s up from a 12 percent chance yesterday.

Consumer prices rose 0.8 percent in the year through June, the slowest pace since 1999, according to government data released Oct. 16.

All 17 economists in a Bloomberg News survey last month predicted the cash rate will be unchanged until next year. Most expect no change until the second half of 2013.

The Treasury Department this week said the pace of economic growth has slowed, without providing forecasts. Gross domestic product will expand 1.1 percent in the second half, according to the median forecast of nine economists in a Bloomberg survey. The economy grew 1.6 percent in the six months ended June 30.

Job Cuts

Rakon, a New Zealand maker of crystal oscillators for guidance systems used in smartphones, this week said 60 workers in Auckland will lose their jobs as it moves more manufacturing to China. Solid Energy New Zealand Ltd., the government-owned coal miner, last month fired 220 South Island workers as falling prices forced it to close a pit.

New Zealand’s economy has been buffeted by earthquakes on its South Island and a global economic slowdown in the past two years, leading to an exodus of workers to Australia and other countries with better job prospects.

Still, companies are hiring in Christchurch and the surrounding Canterbury region where earthquakes in 2010-2011 caused an estimated NZ$30 billion ($25 billion) of damage to homes, roads and commercial buildings, today’s report showed.

Employment in the region rose 2.9 percent from the year- earlier quarter, the report showed. Excluding Canterbury, annual employment growth fell 0.4 percent, it showed.

The report showed the labor force participation rate was unchanged at 68.4 percent. The number of people unemployed rose to 175,000.

Full-Time Work

Full-time employment fell by 13,000 jobs, or 0.8 percent, from the second quarter, according to today’s report. Part-time employment gained by 7,000 jobs, or 1.4 percent. Statistics New Zealand adjusts the full- and part-time employment figures separately, which means they may not add up to the total change in employment.

“It’s just another reason to think economic activity was quite soft in the third quarter,” said Doug Steel, economist at Bank of New Zealand Ltd. in Wellington. “We’re not convinced yet that the bank will ease but the chance has increased,” said Steel, who expects no change in borrowing costs until the fourth quarter next year.

Total actual hours worked per week fell 0.8 percent from the second quarter and 2 percent from a year earlier, today’s report showed.

Hours worked in Canterbury declined 1.4 percent from the year-earlier quarter, the report showed. Excluding the region, hours worked across New Zealand dropped 2.1 percent from a year earlier, the report showed.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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