New Zealand's labor market softened in Q2, with the jobless rate rising to 5.2% and employment contracting 0.1%, largely meeting economist forecasts. Despite a modest quarterly increase in private sector wage growth to 0.6%, the sustained deterioration, marked by a 1.9 percentage point rise in unemployment since June 2022, strengthens the case for the Reserve Bank of New Zealand to cut its cash rate by 25 basis points in August.
New Zealand's Q2 labor market data indicates a continued, albeit expected, softening trend that reinforces the case for monetary easing. The unemployment rate rose to 5.2% and employment contracted by 0.1% quarter-over-quarter, figures that were largely in line with both economist and central bank forecasts. The significance lies not in the quarterly data itself, but in the sustained deterioration evident since June 2022, which has seen the jobless rate climb by 1.9 percentage points and the underutilisation rate increase by 3.5 percentage points. While private sector wage growth accelerated to 0.6% on the quarter, this met expectations and does not offset the broader weakness. Consequently, this report solidifies market expectations that the Reserve Bank of New Zealand will proceed with a 25 basis point cash rate cut at its August meeting, following its recent pause to assess economic conditions.
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