Later tonight we are expecting the New Zealand equivalent of the NFP: the quarterly official employment numbers.

Traditionally, this release supplies some volatility to NZD pairs. And it’s definitely important to keep in mind now that the RBNZ is considering a move in the near term.

The first quarter contains the bulk of the New Zealand tourist season. It also contains a significant amount of agriculture and maritime production. Therefore, it’s the trend-setting quarter for the year. So, it’s worth taking special consideration of the reports from that area, especially the employment figure.

Also, given New Zealand’s reliance on exports to China, the recent news regarding the trade talks between the US and China might have an impact on the country’s outlook. They might also affect the interest of employers to resume hiring and supporting further economic growth and inflation.

Schedule and Expectations

All the data will be coming out at the same at 00:45 CET (which is the day before at 18:45 EST.) The market usually focuses more on the employment change rather than the actual unemployment rate.

Projections are for the employment change to increase by 1.0%. This would be a substantial improvement over the 0.1% registered last quarter but still within the normal range of this data set. Likely, a report above 1.5% would be surprisingly good enough to seriously move the market. However, a drop into the negative would be the first since 2017. And the general consensus is that it would be a negative sign for the Kiwi.

Expectations are for the unemployment rate to tick up to 4.4% from the 4.3% registered at the end of the year. Last quarter was already a move higher in the middle of the tourist season. In fact, it showed the first sign of a reversal in the multi-year downtrend.

A further move higher would be confirmatory of a more pessimistic perspective. However, if the number were to return to 4.0% (that is, the multi-year low registered in Q3), then the market would probably interpret that as quite positive. It would be a sign that the worries of the last six months, at least on the employment end, are moving into the rearview mirror.

In terms of the effect on monetary policy, the labor inflation rate is likely to be a key factor this time around. Analysts are projecting a range of results from 1.9% to 2.1% compared to the 2.0% reported prior. A move below 2.0% would signal a move away from the central bank’s target.

Considerations

Because New Zealand is in the southern hemisphere, their seasons are reversed. While other economies ramp up with short-term summer employment opportunities, New Zealand is transitioning to lower economic activity for the winter.

This could materialize in the employment trends, where people move from full-time tourism and agriculture jobs to part-time employment, with the resulting effect on inflation trends. Unlike the Fed, the RBNZ does not have a mandate to support employment. So, this data is indirectly important for monetary policy.

Given how the markets reacted to the CPI figure, there has been something of a pattern of aggressive responses to data. And given that quite a few analysts are pointing to potential RBNZ action as soon as next week, we could get extra volatility with this figure.