New Zealand's unemployment rate unexpectedly jumped to a 13-1/2 year high above 7 percent in the September quarter, further evidence of a patchy recovery that points to interest rates being held at a record low well into next year. Employment fell by 8,000 jobs, or 0.4 percent, in the three months to September 30, even as the workforce participation rate held steady at 68.4 percent, Thursday's official data showed.
That sent the unemployment rate up to 7.3 percent from 6.7 percent in the June quarter, its the highest since March 1999. The data surprised analysts, with forecasts in a Reuters poll centring on a 6.7 percent unemployment rate and jobs growth of 0.3 percent.
"Certainly it shows there's no sign of the labour market picking up and possibly it's gotten worse, so it will support the Reserve Bank in keeping rates on hold for now," said Westpac senior economist Felix Delbrueck. New Zealand's economy has struggled to gather momentum after the global crisis, recession and earthquakes, and full-time employment fell by 0.8 percent in the September quarter The New Zealand dollar slumped around two-thirds of a cent to a low of $0.8175, before edging back to $0.8182. Interest rate futures rose as much as 10 points as some investors priced in a greater chance of a rate cut, and more likely slow rate increases starting in late 2013.
Overnight indexed swaps implied a 22 percent chance of a rate cut next month from 12 percent before the data. Job losses were led by the manufacturing, construction, wholesale and transport sectors, while the agriculture, mining, healthcare sectors added workers.