New Zealand’s labour market was expected to ease in the third quarter, but the decline in job growth was a surprise. Job growth declined by 0.2% q/q, compared to a 1% gain in Q2 and below the market consensus of 0.4%. The unemployment rate rose to 3.9% in the third quarter, up from 3.6% and in line with the market consensus.
This was the highest unemployment rate since the second quarter of 2021. The employment report indicated that there is increasing spare capacity in the labour market, as elevated interest rates have cooled the economy.
The Reserve Bank of New Zealand’s aggressive rate tightening has lowered inflation, which dropped to 5.6% in the third quarter. Inflation expectations are also declining and this is an encouraging sign for the central bank, which has held rates for three straight times and would prefer to extend the pause phase and avoid a hike at its meeting in November.
The Federal Reserve winds up its two-day meeting today and the markets have fully priced in rate pause, which would keep the benchmark rate at 5.25%-5.50%. That doesn’t mean that the meeting is without significance. Investors will be looking for signals as to what the Fed plans to do next. Fed Chair Powell has been hawkish about inflation and I wouldn’t be surprised if he reiterated the same message at today’s meeting.
Ahead of the Fed announcement, JOLTS Job Openings rose to 9.55 million in September, up from a revised 9.49 million in August and above the market consensus of 9.25 million. This was the highest level in four months, another sign that the labour market remains strong. The US releases nonfarm payrolls on Friday, with the banner gain of 336,000 last month still fresh in investors’ minds. The market consensus for September stands at 180,000.
Source: Market Pulse
