However, the participation rate – the number of people exiting and entering the job market – was likely to be the deciding factor, he said.
“Employment growth of around 0.5% would be more than enough to absorb the modest 0.3% rise in the working age population, and on its own would suggest a fall in the unemployment rate,” Gordon said.
“But … the participation rate has been choppy over recent quarters, and in the June quarter we saw an unusually large 0.3 point rise to 70.7%; we’re assuming some payback this time with a more modest 0.1 point rise to 70.8%.”
Kiwibank economists were more optimistic, picking a fall in unemployment to 5.4%.
“We expect the September quarter labour market data to reflect the rebound in confidence and drop in oil price we experienced over the September quarter,” said economist Alexandra Turcu.
But she also expected wage growth to have remained subdued, with private sector wages growing just 0.7% compared with the June quarter.
“The point being, it’s a bit too early to celebrate a labour market tightening,” she said.
“This is just a small move and not sufficient to move the needle on the economy.”
The unevenness in the labour market was likely to persist, with older age groups snapping up more jobs and leaving fewer for younger workers, she said.
“Unemployment amongst under-25s is expected to remain painfully high.”
While ANZ also expects to see numbers showing job creation and employment growth, it is picking a rise in the participation rate, which will see unemployment flat at 5.6%.
Economist Matthew Galt is picking annual growth in the Labour Cost Index (LCI) to tick 0.1 point higher to an annual rate of 2.1%.
The LCI measures the cost of an hour’s work for employers.
The Quarterly Employment Survey (QES) average hourly earnings provided a better measure of what workers actually receive, Galt said.
At best it would only match the annual pace of consumers price index (CPI) inflation at 3.7%, he said.
He expected private sector average hourly earnings to rise just 3.6% and total economy average hourly earnings growth (private and public sector) to be slightly lower.
“Overall, the labour market data is expected to show considerable spare capacity, with enough strength in employment growth to prevent a further rise in the unemployment rate,” he said.
For the Reserve Bank of New Zealand (RBNZ), anything more than a slight tick up in wage inflation would cause “consternation”.
“While contained wage growth is not good news for households facing acute cost-of-living pressures, it does mean that wage-price spiral risks are mitigated.”
Given inflation pressures from several other directions – such as fuel prices, a falling kiwi dollar, and rising administered prices (like rates) – the RBNZ was relying on ongoing labour market slack to prevent inflation becoming embedded in the economy, he said.
ASB economist Wesley Tanuvasa noted that higher default KiwiSaver contributions and strong labour supply would likely contain wage pressures.
“This keeps the risk of a wage-price spiral low,” he said.
“There is contention on how much disinflationary pressure the labour market is imparting on the NZ economy. We suspect the disinflation may not be as much as the RBNZ assumes.”
That was one reason ASB was less comfortable with the medium-term inflation outlook, he said.
ASB expects a 25 basis point hike in December and a 3.5% OCR peak by March 2027.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
Stay ahead with the latest market moves, corporate updates, and economic insights by subscribing to our Business newsletter – your essential weekly round-up of all the business news you need.