Unemployment expected to push up to near 11-year high, economists warn

Unemployment is set to push up to a near 11-year high with too many people and a weak supply of jobs. Major bank economists expect the unemployment rate to inch up to 5.4 or 5.5 percent for the three months ended June, from the 5.3 percent rate in March. Westpac senior economist Michael Gordon said employment growth is subdued. "The jobs market has held its ground through the Middle East conflict, but it hasn't gathered the momentum that we would have otherwise hoped to see." Employment has been gradually picking up again in recent months, but not quickly enough to keep up with population growth. Expectations are that a few thousand jobs may have been created during the quarter. ANZ senior economist Miles Workman said businesses had not been firing staff to any extent, but weak economic activity meant there was little hiring either. "Overall, the Q2 data are expected to paint a relatively soft picture of the labour market, with firms having pressed the pause button in response to the oil price shock and heightened global uncertainty." He said he would be looking for clues on the underlying state of the labour market, such as the number of hours worked. "Firms typically reduce available hours during a downturn before resorting to layoffs, particularly when they expect any weakness to be temporary." Labour market numbers can be a statistical lottery, influenced by workforce size and participation levels. Other indicators show weak demand for staff, and the Westpac-McDermott Miller Employment Confidence index plunged to its lowest level since inception. Wage growth is expected to remain subdued at 2 percent, lagging inflation at 4.1 percent. The RBNZ is unlikely to deter further cash rate rises despite data. Labour market weakness is helping contain inflation pressures, reducing the likelihood of the RBNZ needing to lift the official cash rate beyond 3 percent.