NZ Dollar Drops as Soft Jobs Growth Reduces RBNZ Rate Hike Bets
- New Zealand Dollar fell against its major peers on softer employment data
- While unemployment declined, y/y jobs growth was slowest since 1Q 2016
- Local 2-year bond yields dropped pointing to reduced RBNZ rate hike bets
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The New Zealand Dollar depreciated against its major counterparts after a mostly disappointing second quarter jobs report. Starting with the good news, the unemployment rate ticked down to 4.8 percent from 4.9 percent as expected. This was the lowest reading since the fourth quarter of 2008.
Now the not so great news. Year-over-year, the number of jobs grew by 3.1% versus predictions of 4.1% growth. This was the slowest pace since the first quarter of 2016. Quarterly readings for the same measurement also fell short of estimates at -0.2% versus +0.7% expected. This was the first contraction since 3Q 2015.
After enjoying five consecutive quarters of growth, the labor force participation rate edged down to 70.0 percent from 70.6 percent. This could perhaps explain why unemployment fell amidst weak jobs growth as discouraged workers left the market.
With overnight index swaps pricing in at least one RBNZ rate hike over the next 12 months, todays timid employment figures seemed to have helped reduce some of those hawkish expectations. Indeed, 2-year New Zealand government bond yields fell as the data crossed the wires.
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