Kiwi bounces back as jobs data underlines growth in economy

The New Zealand dollar jumped about half a US cent, recovering ground lost after yesterday’s central bank intervention comments, on figures showing the labour market is growing and the jobless queue is shorter.

The kiwi rose as high as 84.62 US cents from 84.16 cents immediately before the figures were released. The trade-weighted index rose to 78.13 from 77.70.

The jobless rate fell more than expected to 6.2 percent, the lowest since March 2010, while the number of people in work climbed 1.7 percent in the quarter to 2.23 million, the biggest jump since the series began in March 1986.

"Today's data is telling us that New Zealand is in a relatively good position and therefore it should have a relatively good exchange rate," Craig Ebert, senior economist at the Bank of New Zealand says.

The employment data “fits with everything else we have been looking at in the economy. This is not telling us that the economy is raging away, it's just telling us that it's progressing at a reasonable rate”.

Much of the strength was driven by Canterbury, where the jobless rate tumbled 21 percent to 4.3 percent and the participation rate and employment rates both climbed. But the figures point to some improvement nationwide, as ex-Canterbury unemployment fell to 6.5 percent from 7.2 percent.

The number of people in work climbed by 38,000, or 1.7 percent in the quarter to 2.23 million, the biggest jump since the series began in March 1986, while the participation rate improved to 67.8 percent from 67.2 percent, according to Statistics New Zealand’s Household Labour Force Survey.

The jobless rate was expected to be 6.8 percent, according to a Reuters survey of 12 economists. Jobs growth was forecast to be 0.8 percent quarter on quarter. The participation rate met expectations.

The data follows figures this week showing private sector ordinary time wages rose 0.4 percent in the first three months of the year from the fourth quarter of 2012, and gained 1.8 percent from the first quarter last year.

While this week’s data shows a bounce back from a surprisingly weak fourth quarter, there have been some high-profile job cuts that underline that the labour market is still tepid.

The employment rate is still down 0.3 percentage points over the year and well below levels seen before the 2008 and 2009 recession, Statistics NZ says. The participation rate is down 0.8 percentage points in the year.

Fonterra, which imposed a hiring freeze in February, said this month it may eliminate up to 300 jobs as it seeks annual cost savings of $65 million a year, adding to $60 million of cost cutting already targeted for 2013.

Solid Energy yesterday announced plans to cut 105 jobs, adding to 440 already shed as the unprofitable state-owned coal miner.

Tait Communications announced restructuring that could cut 70 workers.

Today’s figures showed some improvement in employment for young people. The jobless rate for people aged 20-24 fell 4.1 percentage points to 10.9 percent, the lowest since the third quarter of 2009.

The currency has climbed back to levels it was at yesterday, before Reserve Bank governor Graeme Wheeler disclosed the bank had been in the foreign exchange market trying to take the top off the kiwi’s rallies.

“The rise in the currency showed traders were focused on trends in the economy rather than transitory events such as currency interventions,” Mr Ebert says.

(BusinessDesk)