What the Reserve Bank will look for in today's job market data

Published in Humor and Quirks on Tuesday, August 5th 2025 at 14:28 GMT by The New Zealand Herald
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ANALYSIS: Liam Dann takes a deeper dive into the week's economic news.

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The New Zealand Herald’s “Inside Economics” piece delves into two distinct but interconnected economic concerns: the Reserve Bank of New Zealand’s (RBNZ) assessment of the current job market and the ongoing repercussions of former U.S. President Donald Trump’s tariffs, particularly their impact on global trade and consumer costs. The article frames these issues as critical indicators of broader economic health and potential policy shifts.

The primary focus initially lies on the impending release of New Zealand's latest job market data. The RBNZ is keenly awaiting this information to inform its monetary policy decisions. The analysis emphasizes that the RBNZ isn’t solely looking at headline unemployment figures; they are scrutinizing a much more nuanced picture. Key areas of interest include wage growth, underutilization rates (which account for those who want work but can't find it or have given up searching), and the participation rate – essentially, the percentage of working-age people actively seeking employment.

The article highlights that while unemployment remains relatively low, there are signs of a softening labor market. Increased job ad volumes in previous periods haven’t translated into equivalent hiring rates, suggesting employers are becoming more selective. This shift is attributed to several factors including slowing economic growth and concerns about future demand. The RBNZ will be particularly interested in whether wage pressures are easing. Persistent high wage growth can fuel inflation, prompting the central bank to maintain or even increase interest rates, which would further dampen economic activity. A cooling labor market could provide some relief on this front, allowing the RBNZ more flexibility in its policy stance.

The article posits that a weaker-than-expected job market report could lead the RBNZ to reconsider future rate hikes and potentially signal a shift towards a more dovish (less restrictive) monetary policy. Conversely, a robust report would reinforce the need for continued vigilance against inflation and might even suggest further tightening is necessary. The analysis underscores the delicate balancing act the RBNZ faces: controlling inflation without triggering a recession.

The second half of the article pivots to an examination of the lingering effects of Trump’s tariffs imposed during his presidency, primarily targeting goods from China but impacting global trade flows significantly. While these tariffs were initially presented as a means to protect American industries and jobs, the piece argues that the ultimate cost is borne by consumers and businesses worldwide.

The core argument is that tariffs are not simply absorbed by producers or importers; they are largely passed on to end consumers in the form of higher prices. While some companies might attempt to absorb the costs initially to maintain market share, this is often unsustainable in the long run. The article explains how tariffs distort trade patterns, leading to inefficiencies and increased costs across supply chains. Businesses are forced to seek alternative suppliers or adjust production processes, which can be complex and expensive.

Furthermore, the piece points out that retaliatory tariffs imposed by other countries further exacerbate the problem, creating a cycle of escalating trade barriers. This disrupts international commerce, reduces overall economic efficiency, and ultimately harms global growth. The article notes that while some industries might benefit from tariff protection in the short term, the long-term consequences are generally negative for the broader economy.

The analysis also touches upon the complexities of disentangling the effects of tariffs from other factors influencing prices, such as inflation driven by supply chain disruptions and geopolitical events. However, it maintains that tariffs consistently add to inflationary pressures and reduce consumer purchasing power. The article suggests that while some of Trump’s policies have been modified under subsequent administrations, the legacy of trade protectionism continues to shape global economic dynamics.

Finally, the piece concludes by emphasizing the interconnectedness of these two economic narratives: the RBNZ's assessment of the job market and the ongoing impact of trade barriers. Both highlight the challenges facing policymakers as they navigate a complex and uncertain global economic landscape. The article implicitly suggests that resolving inflationary pressures requires not only managing domestic demand but also addressing structural issues like trade distortions that contribute to higher prices. The overall tone is one of cautious observation, acknowledging both immediate concerns (the job market) and longer-term systemic challenges (trade policy).

Read the Full The New Zealand Herald Article at:
[ https://www.nzherald.co.nz/business/economy/inside-economics-what-the-reserve-bank-will-look-for-in-todays-job-market-data-plus-who-pays-the-cost-of-trumps-tariffs/P7XRFELZNJGOVANNUN5XYVJN3U/ ]

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What the Reserve Bank will look for in today's job market data

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