New Zealand Jobless Rate Rises to Five-Year-High 4.6%

Feb. 5 (Bloomberg) -- New Zealand’sjobless rate rose to a five-year high in the fourth quarter as a prolonged recession prompted companies to cut production and fire workers.

The unemployment rate increased to 4.6 percent from 4.2 percent in the previous three months, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. The forecast matched the median estimate of 10 economists surveyed by Bloomberg News.

Rising unemployment will curb consumer spending and adds to signs New Zealand’s economy is unlikely to emerge from a recession until the second half of 2009. Reserve Bank Governor Alan Bollard has slashed interest rates and the government is lowering provisional tax payments to revive business confidence after it fell to a record low last year.

“Employers aren’t looking to take people on, which suggests the unemployment rate will go higher,” said Darren Gibbs, chief New Zealand economist at Deutsche Bank AG in Auckland. “The economy is slowing. The hours worked data suggest that if people were employed they weren’t doing as much.”

New Zealand’s dollar rose to 51.02 U.S. cents at 11:45 a.m. in Wellington from 50.68 cents immediately before the report, which also showed that employment unexpectedly increased in the quarter. The yield on a three-month bank-bill futures contract maturing in March rose 9 basis points to 3.2 percent. A basis point is 0.01 percentage points.

March Review

Traders reduced bets that Bollard may cut the interest rate by as much as 100 basis points at his next review in March, Gibbs said.

Employment rose 0.9 percent, or about 21,000 jobs, in the fourth quarter, the statistics agency said. Economists expected employers would shed 15,000 jobs. Employment also gained 0.9 percent from a year earlier.

Total actual hours worked declined 1.9 percent from the third quarter, adding to signs that output from the economy slowed, the agency said.

Telecom Corp., the largest telephone company, this week said it will shift 250 call-center jobs to Manila over the next 18 months to reduce costs. Air New Zealand Ltd., the largest airlines, is firing 200 workers including long-haul cabin crew as it reduces capacity on flights to Asia amid a slump in international travel.

New Zealand’s economy began contracting in the first quarter of last year and will probably remain in recession until June 30, Bollard said last week. The government reports fourth- quarter figures for gross domestic product on March 27.

Trading Outlook

A net 43 percent of companies expected trading would slow in the first three months of 2009, the most since records began in 1970, according to a New Zealand Institute of Economic Research Inc. survey published on Jan. 13. The net figure is calculated by subtracting those reporting an increase in activity from those seeing a drop.

The same survey showed a net 32 percent of companies expect to fire workers in the next year, the most since 1991.

Prime Minister John Key last month said the jobless rate could reach 7.5 percent by mid-2010 as the economy stands still this year. The U.S. jobless rate was 7.2 percent in December; Australia’s was 4.5 percent in January.

Bollard has cut the benchmark interest rate by 4.75 percentage points since July to 3.5 percent to bolster demand. Key yesterday announced a package of business tax reforms designed to reduce the frequency with which small and medium sized companies make tax payments.

Participation rate

The number of people unemployed rose to 105,000, the highest in more than six years.

The number of people working or seeking work rose 31,000 to 2,296,000 and most of the additional people found jobs, the agency said. The number not looking for work or unavailable to work declined 19,000.

The participation rate, which measures the proportion of the population working or seeking employment, rose to a record 69.3 percent from 68.7 percent in the third quarter. Economists expected 68.4 percent.

The highest unemployment rate since December 2003, when it was also 4.6 percent, will ease pressure on wages and slow spending, justifying Bollard’s decision to cut borrowing costs.

Wages for non-government workers rose 3.2 percent last year, the slowest pace in 18 months, the statistics agency said Feb. 2.

Full-time employment gained by 6,000 jobs, or 0.3 percent, in the fourth quarter after seasonal adjustments.

Part-time employment increased by 17,000 jobs, or 3.5 percent. Statistics New Zealand adjusts the full-time and part- time employment figures separately, which means they may not add to the total change in employment.

To contact the reporter on this story: Tracy Withers in Wellington attwithers@bloomberg.net.

Last Updated: February 4, 2009 18:07 EST