Jump in jobless despite job boom

JOB numbers are booming, especially in construction, but the unemployment rate has jumped to a surprise 5.7 per cent, as the strong economy encourages a flood of people to look for work.

Economists had expected unemployment to fall slightly in the December quarter, not rise from the 5.4 per cent rate seen in the September quarter.

The rise in unemployment was a ‘‘red herring’’, Infometrics said, because the job market was not weaker, but getting tighter and swiftly. The number of people in work and the number of hours worked were both climbing rapidly, Infometrics said.

Job numbers were up much more than expected, rising 1.2 per cent in the December quarter, taking annual jobs growth to a strong rate of 3.5 per cent, according to Statistics NZ figures out yesterday.

‘‘With no sign that labour demand is slowing, we expect the unemployment rate to shrink back over 2015 as employers vie for workers in a shrinking pool of available labour,’’ Infometrics economist Mieke Welvaert said.

Bank of New Zealand economists also said that despite high migration, staff were ‘‘getting harder and harder to find’’. If that remained so, then it was just a matter of time before wage inflation picked up. But till that was obvious, the Reserve Bank would keep interest rates steady.

The surprise lift in the unemployment rate was seen as a sign of a robust economic outlook, encouraging more people to move into the workforce within New Zealand and from overseas, as migration hit record highs.

In the past year, an extra 80,000 jobs have been created.

‘‘The jobs machine has on,’’ ANZ economists said.

But at the same time, the working age population has grown almost 2 per cent in the past year because of the migration boom of the past year.

The hot spots for jobs are in the building sector, with 25,700 more

rolled people on construction sites than a year ago, dominated by Canterbury and Auckland.

The rise in total jobs in the December quarter was ‘‘trumped’’ by the extremely strong growth in the working age population and a record participation rate of 69.7 per cent, sending the unemployment rate up to 5.7 per cent, ASB said.

In just three months, the workforce grew by 36,000, the biggest increase so far, and the participation rate also jumped to record levels of 69.7 per cent.

The workforce is growing fast in the 20 to 34-year age group, which reflected the recent migration boom.

The job figures suggested the economy grew solidly in the final quarter of the year, ASB said.

Job numbers boomed in Auckland, rising by 20,000 in just three months. In the Wellington region, job numbers grew 7000 in the quarter and up almost 5000 on the same quarter a year ago.

Jobs growth was widespread across industries, including professional services, and government sectors.

And the employment rate for women increased to a record level of more than 60 per cent, the highest level since records began in 1986.

At the same time, the number of women looking for work also increased.

The overall employment rate is the best in six years at 65.7 per cent.

In other figures out yesterday, annual wage inflation, as measured by the labour cost index (LCI), increased 1.8 per cent. Wage rises are small in part because inflation is so low, with little in the way of cost of living adjustments for workers.

Public sector wages are still being tightly controlled, with an average increase of just 1.1 per cent in the past year.

So while private sector wage rises were modest, public sector rises were ‘‘even more so’’, ASB said.

Low inflation and a rising pool of new migrants are keeping a lid on wage rises.