Private sector wage inflation misses expectations in June quarter

New Zealand private sector wage inflation rose at a slower pace than expected in the second quarter as a growing labour market and static consumer prices continued to limit pay increases.

Private sector ordinary time wages rose 0.4 percent in the three months ended June 30, an unchanged pace from the March quarter, and were up 1.6 percent from a year earlier, slowing from a 1.8 percent annual increase in the prior period, according to Statistics New Zealand's labour cost index. That was short of economists' expectations for a quarterly rise of 0.5 percent and an annual lift of 1.8 percent, adding to the subdued view on wages.

Including the public sector, ordinary time wages rose at an unchanged pace of 0.4 percent in the quarter and slowed to a 1.5 percent increase from a year earlier.

The biggest quarterly increases were for retail trade and accommodation and food services, which rose 0.8 percent and 1.3 percent respectively after a hike in the minimum wage to $15.25 an hour from April 1. Wages growth in education and training was the most subdued in the quarter, rising just 0.1 percent for an annual increase of 0.6 percent.

The quarterly employment survey, also published today, showed private sector ordinary time hourly wages rose 0.8 percent to $27.72, and were 2.1 percent higher than a year earlier. That was the smallest annual increase since the fourth quarter of 2010. Including the public sector, ordinary time wages rose 0.5 percent in the quarter to $29.62 for a 2.1 percent annual gain.

New Zealand's labour market has enjoyed strong participation rates as a growing economy created enough jobs to cater for record levels of net migration, though the bigger supply of workers has kept a lid on wage pressures.

The QES data show full-time equivalent employees (FTEs) rose a seasonally 0.3 percent in the quarter to 1.5 million people while filled jobs were up by the same percentage to 1.87 million people. The number of FTEs was 0.8 percent higher than a year earlier and filled jobs were up 1.1 percent from the June quarter of 2015.

That annual increase was led by a 14 percent increase in the number of workers in accommodation and food services to 89,500. Construction jobs, which have been booming due to the Canterbury rebuild and Auckland housing shortage, fell 0.6 percent in the quarter to 125,200 and were up 6.3 percent from a year earlier.

Today's labour market data would normally be released with the household labour force survey, but that dataset was delayed for a fortnight to ensure it meets quality standards after the government department modified the series this year.

ASB Bank economist Jane Turner said the employment indicators were weaker than expected, and she revised down her team's employment growth forecast to 0.3 percent from 0.7 percent for the quarter and increased its expectation for the unemployment rate to 5.5 percent, from a previous forecast of 5.3 percent.

(BusinessDesk)

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