Labour market shows minimal improvement

The first batch of labour market data for this week shows some improvement - but little to write home about.

This data is being more closely watched than usual for two reasons:

# The first is for any indication that the Reserve Bank's relaxed outlook for cost inflation is on the right track.

# The other is because labour market data is always a "lagging indicator" in the economic cycle and the figures are being anxiously scanned for any sign employers are following up their optimistic answers to business mood surveys with higher wages and more hiring.

On the basis of today's data, the picture is that of cautious improvement.

Annual wage and salary rates rose 2%, or 0.5% for the March quarter, according to the latest labour costs index.

This is in line with the last three results, which have on an annual basis been running at 2% for the past three quarters.

The labour costs index measures changes in pay for a fixed amount of labour input.

Private sector wages are rising faster than in the public sector, a turnaround from much of the past decade, when central and local government pay increase outstripped the public sector in most quarterly figures.

Private sector wages rose 0.5% for the March quarter and 2.0% for the year, while public sector wages rose 0.4% for the quarter and 1.6% for the year.

The quarterly employment survey, which, unlike the labour costs index measures changes in pay rates but also includes changes to the mix between and within businesses, shows little improvement.

The number of filled jobs was unchanged, while the number of full time hours worked rose by a margin-of-error 0.1%.

The number of hours worked in March fell by 0.5%, the first quarterly fall since December 2010.

Over the year, the picture is a little less downbeat. Average hourly earnings rose 3.8%, or almost $1 an hour.

This has taken a downward turn in recent months, with a seasonally adjusted figure for average weekly paid hours shrinking by 0.4% in the March quarter and 0.3% in the December quarter.