Wellington. New Zealand's unemployment rate fell to a nine-year low at the end of 2017 as employment growth remained surprisingly strong, though it was not expected to shift the central bank's view that interest rates will remain at a record low for some time.
Analysts said the soft pace of wages growth and a rise in the number of people who would work more if they could suggested the jobs market may have a bit more spare capacity than the headline numbers suggested.
Wednesday's (07/02) data came a day ahead of a monetary policy review, where the Reserve Bank of New Zealand is expected to project the official cash rate (OCR) will remain at 1.75 percent through this year.
"While we certainly would not discount the strength in the quarter and the overall message of a strong labor market, there are a few more mixed messages in the detail," ANZ Bank senior economist Phil Borkin said in a report.
"We therefore see little in the figures to alter the RBNZ's cautious stance towards the monetary policy outlook."
The unemployment rate edged down to 4.5 percent in the December quarter, the lowest rate since the end of 2008 and a touch better than market forecasts for an unchanged reading of 4.6 percent.
Employment grew a stronger-than-expected 0.5 percent in the quarter, after a 2.2 percent rise in the third quarter.
The New Zealand dollar jumped half a US cent on the better-than-expected headline numbers, but then pared those gains through the day as the perception grew that the data would not significantly shift the policy outlook.
Despite the strong jobs growth over the second half of 2017, wages growth remained moderate at 1.9 percent in annual terms, unchanged from the third quarter, and the underutilization rate edged up to 12.1 percent.
"The rise in the underutilization rate, which includes those people who have a job but want to work longer, suggests the labor market isn't quite as tight as the unemployment rate suggests," said Paul Dales, Capital Economics chief economist for Australia and New Zealand.
The modest wages growth was consistent with other measures such as consumer inflation showing price pressures remain muted, arguing for steady monetary policy even as activity indicators improved.
"The tight labor market keeps the bias tilted towards a higher OCR, but the contained backdrop for wage inflation suggests no immediate need for the RBNZ to deviate from its on-hold stance," ASB chief economist Nick Tuffley said in a report.
The Labour-led government that won office in late 2017 plans to add maximizing employment to the central bank's objectives alongside its inflation target. It announced a review of the RBNZ's mandate in November.