New Zealand: Unemployment rate seen higher at 3.3% in Q2 2022 – TDS

Analysts at TD Securities (TDS) offer their expectations on New Zealand’s labor market report due on the cards on Wednesday.

Key quotes

“Contrary to consensus, we expect the labor market to soften slightly with the Q2’22 unemployment rate rising to 3.3% (cons: 3.1%, Q1’22: 3.2%).”

“While employment growth is likely to remain robust at 0.5% q/q (Q1: 0.1%), an increase in labor supply from the reopening of international borders may drive the unemployment rate higher.”

“Omicron-related disruptions may also persist in Q2 and is a downside risk to employment growth.”

“On wages, we expect a 1.2% q/q increase in the Labor Cost Index (RBNZ: 1.2%, Q1: 0.7%), bringing the annual growth rate to 3.4% y/y given the tightness in the labor market.”

“With the labor market holding up and annual inflation staying 7%, we expect the RBNZ to continue hiking by 50bps at its August meeting.”