NZ Labour Market Report: Unemployment Hits Decade High Amid Strong Hiring
New Zealand's labour market report for the June quarter showed that unemployment hit its highest level since June 2015, increasing to 5.6%. Despite a strong quarter for hiring, with employment rising 0.5%, more than double the expected gain, the increase in labour force participation was the main driver of higher unemployment.
The underutilisation rate also climbed to 13.8% from 12.9%, and while wage growth wasn't a game-changer, private sector labour cost inflation edged above the RBNZ's forecast at 2.0% year-on-year.
Markets may have overcooked the RBNZ's hawkish bias, but another 25 basis point rate increase is still highly likely at next month's meeting. The two-year swap rate fell to 3.61%, reflecting reduced expectations for a more aggressive tightening cycle beyond neutral, estimated by the RBNZ to be around 3%.