(RTTNews) - New Zealand wage growth in the third quarter was the weakest since 2002 despite positive signs in the economy.

The labor cost index increased 2.1% in the September quarter from the previous year, after rising 2.8% in the June quarter, a report published by Statistics New Zealand in Wellington revealed Tuesday. Annual increase seen in the third quarter was the smallest since the final quarter of 2002.

Salary and ordinary time wages in the private sector climbed 0.4% from the second quarter taking the annual growth to 1.9%. The sequential growth was larger than the expected 0.3%.

Including overtime, salary and wage rates rose at a pace of 0.5% in the third quarter compared to a 0.3% increase in the June quarter. Wages for non-government workers moved up 0.4% sequentially in the third quarter, slightly larger than the 0.3% increase in the second quarter. At the same time, growth in the public sector was 1.1%, following a 0.4% rise in the June quarter.

Economists at Westpac Bank said the apparent acceleration in wage growth over the second quarter’s 0.3% is illusory. Most workers receive their annual pay increase in the second half of the year, so the unadjusted labor cost index tends to advance more in the final two quarters, they wrote in a note.

According to the Quarterly Employment Survey, full-time equivalent employees, filled jobs and total paid hours slipped in the third quarter from the previous year. Full-time equivalent employees dropped 3.5% and filled jobs decreased 2.6% on a yearly basis, driven by the manufacturing sector. At the same time, full-time equivalent employees were down 1% sequentially.

Gross earnings increased by a seasonally adjusted 1.6% for the year to September, while total paid hours slipped 3% for the same period to 49 million. Despite a fall in paid hours, total gross earnings increased over the year, leading to a 4.9% rise in the average total hourly earnings in the year to September.

In the third quarter, average hourly earnings in the private sector grew at a faster pace of 1.7% from the prior quarter, while the expected increase was just 0.5%. Compared to the third quarter of 2008, hourly earnings rose 4.4%.

Further, Westpac economists said the employment and activity indicators in the QES were consistent with their view that third quarter economic activity expanded modestly and employment fell slightly. During recessions, the lowest paid workers are most likely to be laid off, which leads to raise the measured average pay rate. Such compositional effects shows why the survey held up during the recession, but they cannot explain the strong rise this quarter because employment is no longer falling materially.

The labor force survey results from the Statistics New Zealand is due on November 5. The jobless rate is forecast to rise to 6.4% in the third quarter from 6%.

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Posted in Categories: Economy, Forex, New Zealand, Releases.

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