New labour market data out this week is predicted to show the worst of the jobs losses are behind us.
Market consensus is that the unemployment rate rose from 5.3 to about 5.5 percent over the December quarter.
ANZ bank is of the view unemployment inched slightly higher at 5.6 percent, adding that there may be some statistical quirks in the data, but it would paint a clearer picture of some of the recent deterioration in the labour market.
Senior economist Miles Workman said the increase in the unemployment rate is less a sign of jobs being lost, rather an indication of more people returning to the labour force.
“What happened with the lockdown is participation [in the labour market] fell quite sharply. Now a spike higher in the participation rate….for Q4 could present some downside to our overall labour market pick via a higher than expected unemployment rate.”
“If we do get a big catchup in participation [it could mean the] unemployment rate could look a lot worse at the headline level.”
Workman said he expected the underutilisation rate, which is a measure of slack in the labour market, would remain at elevated levels of about 13 percent for quite some time.
“We are still dealing with a significant economic shock, albeit that shock hasn’t been as bad as all of our earlier forecasts. We’ve been getting these positive surprises which has been great but the absolute picture is still not a great one.”
The bank expected wage growth to be weak at about 0.5 percent because firms are likely to be hesitant about raising wages in light of prevailing uncertainty and other cost pressures.
However, the effect on different industries is likely to be uneven, as pockets of the economy were booming, such as construction while the likes of the tourism sector was still struggling with ongoing border closures, Workman said.
Stats NZ will release the 2020 fourth quarter labour market numbers on Wednesday.