NZD/USD forecast: Jobs report weakens case for aggressive RBNZ hikes

New Zealand's unemployment rate rose to its highest level in over a decade in June, but despite this, a strong quarter for hiring softened the blow. The unemployment rate climbed to 5.6% in the June quarter, surpassing both market and RBNZ expectations of 5.4%. The broader underutilisation rate also increased, reaching 13.8% from 12.9%.

The strong employment numbers were due to a sharp lift in labour force participation, with the rate jumping to 70.7%, above both market and RBNZ forecasts of 70.3%. However, this resulted in more people entering the workforce than the economy could absorb, leaving unemployment and underutilisation higher.

Wage growth was also not a game-changer, with private sector labour cost inflation edging above the RBNZ's forecast at 2.0% year-on-year but remaining at levels inconsistent with a wage breakout that could fuel domestic inflationary pressures.