\u201cAn emerging return to jobs growth means that the unemployment rate has likely reached its peak for this cycle,\u201d Westpac senior economist Michael Gordon said.<\/p>\n
Higher-frequency indicators \u2013 such as monthly filled jobs numbers \u2013 had pointed to a modest lift in jobs in recent months, enough to match the growth in the working-age population, Gordon said.<\/p>\n
ANZ, Kiwibank and Westpac economists see the unemployment rate unmoved from the September quarter.<\/p>\n
It has remained relatively stable (5.2% in the June quarter and 5.1% for the two quarters before that) for the past year, although the topline figure has been flattered by a falling participation rate in the labour market.<\/p>\n
The participation rate has fallen for five consecutive quarters.<\/p>\n
That reflects the fact that large numbers of people have either stayed longer in school or have returned to further training as job opportunities have dwindled.<\/p>\n
\u201cWe have pencilled in a stable participation rate at 70.3%, but given the recent improvement in economic activity, we wouldn\u2019t be surprised if this were to increase slightly,\u201d said ANZ senior economist Miles Workman.<\/p>\n
A higher unemployment rate than forecast, owing to higher participation, wouldn\u2019t necessarily indicate the labour market was on the wrong trajectory, he said.<\/p>\n
\u201cWhile it would point to a more disinflationary labour market than the RBNZ anticipates, it would also add to the evidence that conditions are rounding a corner, with labour supply responding to improving job prospects.\u201d<\/p>\n
In an early sign that the labour market was close to rounding a corner, both hours paid and hours worked lifted in the third quarter, he said.<\/p>\n
\u201cWhile these data can be volatile from quarter to quarter, the low base and the signal in the high\u2011frequency indicators for [the fourth quarter] suggest we will see another rise, adding further evidence that although the headline unemployment rate has held up, labour market conditions are gradually improving.”<\/p>\n
ASB\u2019s Smith said increases in the working-age population and an increase in labour force participation from five-year lows might generate the first climb in annual labour force growth in more than a year.<\/p>\n
Labour cost growth was expected to remain slightly above the midpoint of the 1-3% inflation target band, he said.<\/p>\n
\u201cBut, with the demand for labour stirring and spare labour market capacity eroding, conditions are in place that will see a pick-up in wage inflation over 2026,\u201d Smith said.<\/p>\n
\u201cReducing labour market slack suggests the need to normalise OCR settings. <\/p>\n
\u201cWe expect a 25 basis point hike in December and a 3% OCR endpoint, but note the risks are pointing to a larger and more frontloaded pace of OCR hikes.\u201d<\/p>\n
Liam Dann is business editor-at-large for the NZ Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.<\/p>\n