New Zealand labour force growth outpacing employment

Over the past year, we've seen GDP growth slow and business confidence falling to low levels. Together, these factors have seen businesses reining back hiring. In light of these developments, the Household Labour Force Survey will show that employment in the economy grew by 0.4% over the September quarter. This would result in annual employment growth softening to 2.6%. While that's still healthy, it's well down on the above 3% rates we were seeing over the past year.

Importantly, growth in employment is coming atop very strong population growth, with net immigration rising to a record high over the past year. The resulting increase in the labour force means that, despite continued employment growth, the unemployment rate is expected to push higher to 6.2% in September (up from 5.9% in June). That would be the fourth increase in the unemployment rate in as many quarters. 

"A key risk around our forecasts is what happens to labour force participation. We expect that the participation rate will push back up to 69.4% in September - just shy of the record high reached in March.", notes Westpac NZ Research.

But although strong population growth has been boosting labour force participation, there can be bumps (like the unexpected pull back we saw in June) which can throw estimates of the unemployment rate around. The QES is expected to show that the number of full-time equivalent employees grew by 0.7% in the September quarter. This follows a 0.8% fall in June, and will leave annual growth in FTEs at 2.4%.