New Zealand jobless rate rises less than economists forecast

New Zealand unemployment rose less than expected at the end of last year, adding to signs that the central bank could remain cautious about cutting interest rates.

The jobless rate climbed to 4 per cent in the fourth quarter from 3.9 per cent in the third, Statistics New Zealand said Wednesday in Wellington. Economists expected 4.3 per cent. Employment gained 0.4 per cent from the previous three months, beating estimates of a 0.3 per cent gain, while annual wage inflation eased to 3.9 per cent.

The labour market is cooling as a record influx of immigrants increases the supply of workers and reduces upward pressure on wages, while high borrowing costs are damping household spending. Reserve Bank policymakers say they’ve still got work to do to tame inflation, even as investors expect them to start cutting rates later this year.

The New Zealand dollar rose after the data. It bought 60.96US¢ at 10:52 am in Wellington, up from 60.80 cents beforehand.

The RBNZ in November signaled the risk that it could raise the Official Cash Rate from 5.5 per cent in 2024, and said it didn’t expect to start lowering the benchmark until 2025. Since then, data revisions showed the economy was much weaker in 2023 than previously thought, fuelling bets on a pivot to rate cuts as soon as the second quarter.

Still, RBNZ Chief Economist Paul Conway last month said the bank has “a way to go” to get inflation back to the midpoint of its 1-3 per cent target band.

While headline inflation was 4.7 per cent in the fourth quarter - less than the RBNZ’s 5 per cent projection - non-tradables inflation didn’t slow as much as the bank expected.