WELLINGTON (Reuters) - New Zealand's unemployment rate edged up to 4.2% in the third quarter, official statistics showed on Wednesday, as the country's slower economic growth began to show up in the employment market.
The unemployment rate climbed from an 11-year low of 3.9% the previous quarter, data from Statistics New Zealand showed. The third-quarter figure was just above analysts' expectations of 4.1%.
Employment growth was slower than expected at a sluggish 0.2% in contrast with analysts' expectations of 0.3%.
"September quarter data showed a few cracks starting to appear in NZ's previously rock-solid labour market," ASB senior economist Mike Jones said in a research note. "In many ways this is not surprising given the NZ economy has been in a slowdown phase since late 2016."
The New Zealand dollar <NZD=> sank to $0.6370 before climbing again to $0.6381 following the release.
The data is likely being closely watched by the Reserve Bank of New Zealand (RBNZ) ahead of its final monetary policy decision for 2019 due out next week after it adopted a dual policy mandate that includes targeting employment alongside inflation.
Economists have noted, however, that the bank was already expecting third-quarter unemployment to tick up to as high as 4.4% based on its forecasts in August, suggesting the higher unemployment rate would not necessarily tip the balance in favour of a further rate cut.
Nevertheless, ASB, which is expecting the bank to reduce rates by 25 basis points next Wednesday, said rising unemployment was likely a sign that economic growth contraction was just beginning to hit the labour market and the RBNZ would have to do more to ensure it returned to where the central bank saw the 'neutral' unemployment rate of around 4%.
The bank slashed rates to a record low of 1% in August and has signalled it could cut further if warranted due to subdued inflation and easing economic growth.
Private-sector wages grew 0.6% on a quarterly basis, slowing from 0.8% the previous quarter, for annual growth of 2.3%.
(Reporting by Charlotte Greenfield; Editing by Peter Cooney)
