New Zealand jobless rate hits 5-year high

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New Zealand jobless rate hits 5-year high

New Zealand's jobless rate rose to the highest in almost five years in the third quarter, adding to signs of a prolonged recession that is prompting companies to cut production and fire workers.

The unemployment rate increased to 4.2% from 3.9% in the previous three months, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. The median estimate of 12 economists surveyed by Bloomberg News was for 4.3%.

Rising unemployment will curb consumer spending and adds to signs New Zealand will post its worst gross domestic product result in 10 years. Reserve Bank Governor Alan Bollard has lowered the benchmark interest rate by 1.75 percentage points since July and will probably cut by at least another half point in December to bolster confidence and demand, economists say.

''With the economy in recession since the start of the year, a material deterioration in the labor market is likely to follow,'' Nick Tuffley, chief economist at ASB Bank, said before the report was released. ''Surveys point to falling employment intentions. Firms are likely to be more circumspect on hiring and replacing staff.''

New Zealand's economy contracted in the first two quarters of the year and probably shrank in the three months to September, according to central bank and Treasury forecasts. Bollard last month said full-year growth will be slower than the 0.6% pace he forecast in September. The economy grew 3.2% in 2007.

Employment Declines

Employment rose 0.1%, or about 3000 jobs, in the third quarter, the statistics agency said. Economists expected employers would shed 13,000 jobs. Employment increased 1% from a year earlier.

Business confidence has slumped amid global financial market turmoil that has slowed the world economy. In October, confidence had its largest reversal on record, ANZ National Bank said last week. The same survey showed 30% of companies plan to fire workers in the next year.

Fletcher Building, the nation's biggest building materials company, has fired 600 of its 9,000 workers in the past three months as home construction slows. Carter Holt Harvey last month announced the loss of 316 jobs at two sawmills as it cuts costs because demand for lumber is slowing.

ANZ National said in September it is reviewing staffing levels at its branches amid a decline in teller transactions. The nation's largest bank is also freezing recruitment and reducing the use of casual workers, it said.

Participation Rate

The number of people working or seeking work rose 8000 to 2,266,000 and most of the additional people didn't find jobs, the agency said. The number not looking for work or unavailable to work increased 1000.

The participation rate, which measures the proportion of the population working or seeking employment, rose to a record 68.7% from 68.6% in the second quarter.

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

Wages for non-government workers rose 3.5% in the year ended Sept. 30, the fastest pace on record, the statistics agency reported on November 3.

Total actual hours worked declined 0.9% from the second quarter and rose 0.2% from a year earlier, the agency said.

Full-time employment rose by 8000 jobs, or 0.5%, in the third quarter after seasonal adjustments.

Part-time employment declined by 2000 jobs, or 0.5%. 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.

Bloomberg

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