New Zealand jobless rate hits 11-year high ahead of election

what happened

New Zealand's unemployment rate rose to 5.7% in the third quarter from 5.5% in the previous quarter, Statistics New Zealand reported. It is the highest level since 2015 and came in above the 5.5% forecast from economists in a Reuters poll and from the Reserve Bank of New Zealand. Employment fell 0.1% over the quarter, and the participation rate slipped to 70.4%, below the expected 70.7%.

The figures land in the middle of an election campaign, adding pressure on Prime Minister Christopher Luxon. The opposition Labour Party called the numbers a damning verdict on his economic management, while Finance Minister Nicola Willis argued that uncertainty is weighing on the economy and that the government's plan is working.

The New Zealand dollar dipped before recovering to around $0.5592, while two-year swap rates fell 6 basis points to 3.7815%. The central bank surprised markets last week by holding its cash rate at 2.75%.

why it matters

A weaker labour market reduces pressure on the Reserve Bank of New Zealand to resume rate hikes, which matters for the NZD and the front end of the yield curve. Wage growth also slowed to 2.0% annually, suggesting less inflationary pressure ahead.

market impact

NZD and swap rates: weaker jobs data reduces the chance of further rate hikes

• ▼NZD/USD pressure down — weak jobs data lowers expectations of further RBNZ rate hikes
• ▼New Zealand two-year swap rates pressure down — fewer expected rate hikes pull front-end yields lower

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instruments