NEW ZEALAND: Labour Market Still Weak But Could Be Stabilising
There were some tentative signs in the Q1 labour market data that there is some stabilisation but at weak levels. There was a 0.1% q/q rise in employment driven by a 2.2% q/q jump in part-timers, indicating a cautionary move back into hiring. While the unemployment rate was stable at 5.1%, better than consensus, it appears that the rise in labour supply that was expected didn’t materialise. Thus the data is close enough to what the RBNZ expected in February and another 25bp rate cut on May 28 remains likely.
- Wage inflation slowed with the labour cost index rising 0.5% q/q, the slowest quarterly rate in four years, bringing the annual pace down to 2.9% from 3.3%, the lowest since Q4 2021. Private sector wages rose 0.4% q/q after 0.8% q/q in Q1 2024.
NZ wages y/y%
- The RBNZ should be reassured that wages have adjusted to the lower inflation environment and spare capacity in the labour market.
- While part-time employment rose, full-time fell 0.5% q/q to be down 1.9% y/y. This is also reflected in the 0.3%q/q & 2.9% y/y drop in hours worked and the 0.2pp pickup in the underutilisation rate to 12.3%. While the labour market may have reached a turning point, both of these series show that it remains weak.
- The number of unemployed was flat in Q1 but still up 16.4% y/y, but this was the lowest quarterly change since Q2 2022. The number of people who say there isn’t enough work available rose 26.3% y/y, according to Statistics NZ.
NZ employment y/y%
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
US TSYS: Futures Gap Higher On Today’s Re-Open
TYM5 is 113-30, +28+ from closing levels in today's Asia-Pac session, after hitting a high of 114-10.
- On Friday, US tsys dipped then bounced after a higher-than-expected March jobs gain was tempered slightly by a down-revision to prior. The latest profile saw 228k after two weak months (111k Jan, 117k Feb) which in turn followed two booming months (261k Nov, 323k Dec).
- US tsys were well supported on Friday but finished off early session bests after headlines filtered through markets that Tsy Sec Bessent was "quietly" attempting to moderate Pres Trump's hardline stance.
- There was also a brief risk-off unwind late morning after Pres Trump tweeted "This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates," but US tsy yields bounced after Chairman Powell's discussion on the economy at SABEW conference. Chair Powell expressed patience, stating that it is a "good time to take a step back and let things clarify" while "uncertainty of new policies" decline over time.
- According to MNI’s technicals team, focus is on technical resistance at 114-16 (2.000 proj of the Jan 13 - Feb 7 - Feb 12 price swing) after having breached round number resistance (114-03.5 high) on Friday.
BONDS: NZGBS: Richer With Global Bonds, Buoyed By Risk-Off, RBNZ On Wed
In local morning trade, NZGBs are sharply richer, with benchmark yields 7-9bps lower. US tsy futures have re-opened sharply higher at 113-31, +30 from closing levels in today's Asia-Pac session.
- The market has started to realise that this is not just a US problem. A raft of Asian economies have reached out to the US, looking to remove levies on US imports or open trade talks.
- However, China unveiled a 34% duty on all US imports, and this will be front centre as the market attempts to digest the implications of this in the Asian session.
- On Friday, US tsys were well supported but finished off early session bests.
- US tsys cheapened then richened after the higher-than-expected March jobs gain was tempered slightly by a down revision to the prior.
- Swap rates are 8-9bps lower.
- The RBNZ Policy Decision is on Wednesday.
- “The RBNZ Shadow Board is in favor of lowering the OCR by 25bps to 3.50% this week. Most Shadow Board members agreed that a 25b cut is justified in April as inflation is contained and activity in the New Zealand economy remains soft: NZIER.” (per BBG)
- RBNZ dated OIS has 31bps of easing priced for April, with a cumulative 106bps by November 2025.
AUD: A$ Falls Further Today On Tariff-Related Risk Aversion, AUDUSD Breaks 60c
AUDUSD broke below 60c to 0.5933, the lowest in over 5 years, as risk sentiment continues to deteriorate following China’s retaliatory 34% tariff on imports from the US. The pair headed back towards 60c but is now at 0.5994. It fell 4.6% to 0.6041 on Friday as concerns grew that Trump’s tariffs will weigh not just on US growth but also the globe’s. The US dollar benefited from flight-to-quality flows and the index rose 1.0%.
- AUDUSD has breached initial support at 0.6012 and the next level is at 0.5994 and 0.5931, briefly, which cancels the recent bullish theme and confirms the resumption of the downtrend started in late September.
- With Aussie underperforming the G10 and the yen outperforming, AUDJPY fell 4% to 88.78, the lowest since January 2022. It has fallen further at the start of today’s APAC session and is currently around 86.93.
- Risk-sensitive kiwi also struggled on Friday but was not as weak as Aussie. AUDNZD was down 1.2% to 1.0797 after a low of 1.0775 earlier. Today it is at 1.0787 after falling to 1.0707.
- All of the G10 was lower against the greenback but the euro was one of the better performers leaving AUDEUR down 3.7% to 0.5512 after a low of 0.5468. It is currently 1.1% lower at 0.5452. AUDGBP was -3% to 0.4684 after a trough of 0.4651 and is -0.8% so far today at 0.4647.
- Equities sank on Friday with the S&P down 6% and Euro stoxx -4.6% and today the S&P e-mini is already 4.1% lower. Oil prices are weaker with Brent -5.8% to $66.06/bbl and has started today down to $63.39. Copper fell 9.1% and iron ore is below $100/t.
- Today ANZ-Indeed job ads for March are released.
