Wage pressure tipped to grow in tight jobs market
People disappointed their wages haven’t risen even though businesses are crying out for workers may find some hope in figures due out this morning.
Economists are forecasting official unemployment will either remain at the 3.2% first registered in the December quarter, the lowest level since comparable records began in 1986, or slip further to a new record low of 3% in the March quarter.
A year earlier, the unemployment rate was 4.6%, part of decline that began in late 2020 when it jumped to 5.3%.
However, annual employment growth is likely to have slowed, said Kiwibank economists who expected the rate of employment to hit 3.2% from 3.7% at the end of last year.
A surge in Covid cases during the March quarter may have been among factors affecting hiring decisions, along with the severe difficulty businesses have had in finding staff.
A record number of firms found it difficult to source unskilled staff, and more businesses struggled to get skilled workers, according to NZIER’s recent quarterly confidence survey, while foreign-sourced workers remained hard to get.
‘‘Also keeping the unemployment rate from falling further, is the participation rate holding at a near-record 71.1% of the working age population,’’ the Kiwibank economists said in a research note on Monday.
‘‘The rising cost of living will be encouraging high engagement with the labour market as households face into rapidly rising inflation.’’
Looking ahead, they expected the disruption from Omicron, and its impact on employment, to be short-lived, with employment intentions for the months ahead holding up well.
However, the challenge in finding staff was adding to wage pressure, which they expected to rise above 3% for the first time in 13 years, and hit 4% by the end of the year.
Westpac economists expected unemployment to slip to 3% for the three months ended March.
Signs pointing to a continued tight labour market included a recovery in job advertisements almost back to pre-Delta levels; a 0.2% rise on average in the monthly employment indicator over the March quarter; and lower Jobseeker benefit numbers.
‘‘Workers remain in hot demand, and a substantial part of the rise in job ads is likely to be due to ‘churn’, as workers are poached or jump to new roles,’’ Westpac economists said in a research note on Monday.
‘‘With a jobs market as tight as this, we would expect to see upward pressure on wages and salaries as well.
‘‘That is happening, although at a national level it hasn’t looked particularly dramatic to date – more akin to a catch-up after a period of weak wage growth in the wake of the initial Covid shock.
‘‘However, wage growth tends to lag the broader economic cycle, so this process likely has further to play out.’’
Stats NZ was due to release the quarterly labour market data at 10.45am today.