NZD/USD staggers after upbeat New Zealand jobs numbers

The NZD/USD pair wobbled after New Zealand released upbeat first-quarter employment data. The numbers from Statistics New Zealand showed how the coronavirus pandemic had affected the country’s economy.

NZD/USD little changed after weak employment data

The New Zealand dollar was little changed against the dollar after disappointing jobs numbers. The data showed that the employment change in the first quarter rose by 0.7%, which was better than the consensus estimates of -0.3%. The economy added more than 19,000 people in the quarter, bringing the total number of those in employment to 2.6 million

Similarly, the unemployment rate rose to 4.2% from the previous 4.0% as the government forced people to stay at home. According to the office, this was the worst performance since the third quarter of 2019. In a statement, Sean Broughton of the bureau said:

“Our surveys captured a robust labour market in the period before New Zealand went into COVID-19 lockdown. The unemployment rate has remained stable at around 4 percent since late 2018, after trending down since late 2012.”

Meanwhile, the participation rate rose from the previous 70.10% to 70.40%. This rate measures the number of people of working age who are either working or actively looking for work.

At the same time, the labour cost index declined from the previous 0.6% to 0.3%. On an annualised basis, the index was unchanged at 2.4% in the quarter. Further, the underutilisation rate rose to 10.4% in the first quarter from an 11-year low od 10.0% in the fourth quarter. This number measures the spare capacity in the country.

New Zealand starts to reopen

As with all countries, the coronavirus pandemic has had an impact on the New Zealand economy. Recent data showed that retail sales in the country fell by a record low of 3.9% in February. The hospitality industry, which was the most affected declined by about 30%. Spending on electronics also fell by 8.7%.

The manufacturing and services sector have been affected too because most companies closed during the lockdown. At the same time, the important housing market declined at the sharpest rate in March. According to New Real Estate Institute, only sellers sold only 480 residential houses in the final week of March. This was a 62% decline on usual levels.

The New Zealand government and central bank have put measures in place to cushion the economy. In March, the government launched a $7.3 billion stimulus package, which was higher than the one implemented during the last financial crisis. These funds went to tax cuts, income support, and health investments.

On its part, the Reserve Bank of New Zealand brought interest rates to near zero in a bid to promote spending. Further, the bank initiated its first quantitative easing program worth more than $33 billion. It also increased liquidity in the banking industry and launched mortgage payment deferrals.

The country has now started to reopen its economy because the number of coronavirus cases has started to decline. As such, most analysts expect the economy to have a gradual recovery in the next part of the year.

NZD/USD technical forecast

On the daily chart, the NZD/USD pair is slightly below the 50% Fibonacci retracement level. It is also slightly below the 50-day EMA. Also, the pair formed an inverted hammer on Monday. This means that bears are in control, at least for now. As such, they will attempt to move lower and test the 38.2% retracement level at 0.5955.