The unemployment rate has fallen to 4.7 per cent in the March 2021 quarter, from 4.9 per cent in the last quarter of 2020, according to new figures from Stats NZ.

It continues its fall from its recent peak of 5.2 per cent in the September 2020 quarter.

Pandemic uncertainties had ensured a mix of forecasts by economists but the latest number is lower than most expected.

ASB economists were forecasting unemployment would fall slightly back to 4.8 per cent (from 4.9).

Westpac and BNZ saw it holding at 4.9 per cent and ANZ was forecasting an uptick to 5.1 per cent.

The kiwi dollar rose as much as a quarter of a cent aftre the news and was trading at US71.57c.

"The data provide further evidence of how well the New Zealand economy has performed through the global pandemic, with the level of employment higher than pre-pandemic levels."

The result reinforced the sense that the New Zealand economy was past the worst of the Covid-19 shock, said Westpac chief economist Michael Gordon.

"The unemployment rate of 5.2 per cent in the September quarter last year will prove to be the [surprisingly low] peak in this cycle."
"The implication is that while we're still below what the RBNZ would consider to be 'maximum sustainable employment' according to its mandate, the gap is gradually narrowing."

The seasonally adjusted number of people in unemployment fell by 5000 over the quarter, with the number of unemployed women falling by 8000, offset by an increase of 3000 men, Stats NZ said.

Over the year, 13,000 more people were unemployed – 9000 more men and 4000 more women.

Employment rose 0.6 per cent (quarter on quarter) beating estimates of 0.3 per cent.

The participation rate rose to 70.4 per cent versus estimates of 70.3 per cent.

The seasonally adjusted underutilisation rate increased to 12.2 per cent, up 0.4 percentage points quarterly and 1.8 percentage points annually.

Over the year, 56,000 more people were underutilised – equal numbers of whom were men and women – bringing the level up to 366,000.

Underutilisation is a broad measure of spare capacity in New Zealand's labour market and is just as important as the unemployment rate, as it gives us a more detailed picture of the workforce.

Over the year, 56,000 more people were underutilised – equal numbers of whom were men and women – bringing the level up to 366,000.

Wage growth remained steady.

The Labour Cost Index (LCI) increased 1.6 per cent in the year to the March 2021 quarter, with wage inflation remaining steady from last quarter.

This was the first quarter since the December 2019 quarter where annual wage inflation has not slowed.

Liam Dann - NZ Herald Business Editor at Large
May 4, 2021