New Zealand issued a “don’t panic” plea yesterday after data showed unemployment jumped to a 10-year high as the country struggles to recover from effects of the global meltdown.
The local currency was also hit after the Household Labour Force Survey put the jobless rate at 7.3 percent after the number of people out of work rose 18,000 to 168,000 in the three months to the end of December.
The figure was up from the 6.5 percent in the previous quarter and much worse than expectations.
“Importantly, the RBNZ [central bank] was looking for an unemployment rate of just 6.6 percent and a peak of only 6.7 percent. Clearly this prediction has been blown out of the water,” Bank of New Zealand economists said.
The New Zealand dollar fell more than US$0.01 to US$0.6965 and interest rates fell on wholesale money markets, which feed into mortgage rates.
A hike in the official cash rate in April, already at a record low 2.5 percent, was considered possible before the data but economists said there was now little chance.
“The weakness in today’s data raises the real possibility that the RBNZ waits beyond June to begin the tightening cycle,” said Philip Borkin of Goldman Sachs JBWere.
The jump in the number of unemployed was attributed largely to an increase in the number of people entering the labour market and unable to find work at the end of the academic year.
The increase was particularly marked among 15-to-24-year-olds where the rate rose 6.4 percentage points to 18.4 percent.
New Zealand Prime Minister John Key urged the public not to panic and said that despite unemployment reaching its highest level since June 1999, there were signs the economy is starting to improve.
“It is my expectation that unemployment will peak some time this year, hopefully in the first quarter, but the latest by the second quarter,” Key said.
“The signs we have seen from the economy are actually encouraging and it is very important people don’t panic because they see an unemployment number rising, because it is a rearward looking figure,” he said.
“It always lags what is happening in the real economy,” Key said.
Key said the data showed people were not losing their jobs, but more people were looking for work and the economy was not creating jobs fast enough to meet that demand.
The government treasury department had forecast unemployment would peak at 7 percent early this year, before falling gradually. New Zealand slipped into recession at the start of last year due to the effects of drought and the end of a long housing boom.
The length of the recession was extended by the global financial crisis and there were five straight quarters of contraction before the economy showed minimal growth of less than 0.1 percent in the June quarter this year.
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