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UPDATE 1-NZ wage growth tepid in Q1, even as unemployment falls to 9-yr low

Published 02/05/2018, 09:54 am
Updated 02/05/2018, 10:00 am
UPDATE 1-NZ wage growth tepid in Q1, even as unemployment falls to 9-yr low
NZD/USD
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* NZ unemployment at nine-year low of 4.4 pct in Q1

* Wage grow at a sluggish 0.3 pct, 1.9 pct for the year

* Suggests RBNZ will signal no imminent rate hikes (Recasts, adds market reaction, detail)

By Charlotte Greenfield

WELLINGTON, May 2 (Reuters) - New Zealand's unemployment rate dropped to a nine-year low of 4.4. percent in the first quarter, official figures showed on Wednesday, but stubbornly low wage growth left the central bank all-but-certain to signal it would keep rates on hold for now.

The jobless rate hit its lowest since the fourth quarter of 2008 as employment rose 0.6 percent, Statistics New Zealand said, beatings analysts' expectations of 0.4 percent growth.

The participation rate was 70.8 percent, largely driven by more women entering the workforce.

Statistics New Zealand said female employment reached its highest-ever rate at 62.6 percent.

But the strong figures would be little comfort to the Reserve Bank of New Zealand (RBNZ) as wages grew a miserly 0.3 percent, below expectations of a 0.4 percent rise.

Annual wage growth was stuck at 1.9 percent versus first-quarter inflation of 1.1 percent.

The RBNZ, which is set to announce its next rate decision on May 10, has signalled it will keep rates on hold at a record low of 1.75 percent, possibly for years, as it grapples with low inflation even as the economy posts robust growth.

The New Zealand dollar NZD=D4 edged down to $0.6993, from $0.6007 before the release.

The labour figures were the first to be issued since the government added the goal of 'maximising sustainable employment' to the RBNZ's mandate, alongside inflation targeting.

Some economists had thought that an increased focus on employment could lead to more dovish monetary policy over time, but the almost decade-low jobless rate made that question largely academic for the central bank.

"The tight labour market currently looks to be in little need of policy stimulus to meet employment objectives in the new Policy Targets Agreement," ASB Senior Economist Mark Smith said in a research note.

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