New Zealand Jobless Rate Rises to 10-Year-High 7.3%

Feb. 4 (Bloomberg) -- New Zealand’s unemployment soared to the highest level in more than 10 years as a surge of immigrants failed to find jobs. The currency fell as traders bet the central bank will have to delay a planned mid-year rate increase.

The jobless rate rose to 7.3 percent in the fourth quarter from 6.5 percent in the previous three months, Statistics New Zealand said in Wellington today. The median of 10 estimates in a Bloomberg News survey was for 6.8 percent.

Unemployment now exceeds the peak forecast by both Finance Minister Bill English and Reserve Bank Governor Alan Bollard as the economy battles to emerge from its worst recession in three decades. The currency dropped to the lowest in more than four months as investors bet Bollard may keep the official cash rate at a record-low of 2.5 percent until the second half of the year.

“The weakness in today’s data raises the real possibility that the Reserve Bank waits beyond June to begin hiking,” said Philip Borkin, an economist at Goldman Sachs JBWere Ltd. in Auckland.

Bollard said last week he expected to raise borrowing costs “around the middle of 2010.”

New Zealand’s dollar fell to 69.82 U.S. cents at 12:05 p.m. in Wellington from 70.61 cents immediately before the release. The currency is its lowest since Sep. 14.

Exporters Struggle

Exporters such as Cedenco Foods Ltd. and Winstone Pulp International Ltd. closed plants last year, citing increasing costs and the affect of the rising currency on returns. In July, Cedenco said it would shut a vegetable processing plant in Gisborne at a cost of 125 jobs. In October, Winstone said it couldn’t keep a South Island lumber mill open, leaving 110 workers out of jobs.

New Zealand’s immigration growth in 2009 was the highest in more than five years, Statistics New Zealand said in a second report today. The surge in net immigration has been boosted by fewer New Zealanders heading abroad. About 41,600 citizens left last year, the lowest calendar year tally since 2003.

The Reserve Bank on Dec. 10 forecast a peak jobless rate of 6.7 percent in the second quarter. Bollard said last week he didn’t expect to raise the benchmark interest rate until the middle of 2010 because business spending remained weak.

English, who expected the jobless rate would rise to about 7 percent, said this week any subsequent decline may be gradual because companies will give existing employees more hours rather than hire extra workers.

Hours Reduced

Total actual hours worked per week declined for a sixth quarter, dropping 0.4 percent to the lowest level in more than five years, today’s report showed.

Companies such as Fisher & Paykel Appliances Holdings Ltd., the nation’s largest maker of refrigerators and washing machines, last year took advantage of government subsidies to work a nine- day fortnight and save about 60 jobs.

The jobless rate has risen from 5 percent in the first quarter last year, which signaled the end of the nation’s worst recession in three decades.

“As most economists will tell you, employment almost always lags behind economic growth, but we’re not out of the woods yet,” Employment Minister Paula Bennett said in an e- mailed statement.

Companies are optimistic about the economy’s recovery in the next six months, although most expect profits will fall in the first quarter, according to a New Zealand Institute of Economic Research Inc. survey published last month.

The number of firms expecting to hire workers in the first quarter barely exceeded the number planning to reduce staff, the Wellington-based institute said.

Growth Forecast

The Reserve Bank expects the economy will grow 3.1 percent this year after contracting 1.4 percent in 2009. Employment may increase about 0.6 percent this year, it said.

Employment declined 0.1 percent or about 2,000 jobs in the fourth quarter, matching economists’ median expectation, today’s report showed. Employment shrank 2.4 percent from a year earlier.

The number of people out of work rose 18,000 from the third quarter to a 16-year high of 168,000. About 2.3 million of New Zealand’s 4.4 million people are in the workforce.

The surge in unemployment reflects more people looking for jobs but unable to find them, the statistics agency said.

The participation rate, which measures the proportion of the working age population employed or seeking employment, rose to 68.1 percent from 68 percent in the third quarter, matching analysts’ median expectation.

Full-time employment fell by 6,000 jobs, or 0.3 percent, in the fourth quarter after seasonal adjustment. Part-time employment was unchanged. Statistics New Zealand adjusts the full-time and part-time employment figures separately, which means they may not add up to the total change in employment.

The rising unemployment rate removes pressure on employers to pay higher wages and eases inflation. Wages for non- government workers rose 1.5 percent in the fourth quarter from a year earlier, the slowest pace in nine years, the statistics agency said this week.