The Council of Trade Unions says there is room for cautious optimism for wage levels although many people are still not receiving increases.
"It is important for the economy that wage and salary earners have sensible wage increases otherwise there is a risk that lack of spending power will continue to drag the economy back into recession," CTU economist Bill Rosenberg said yesterday.
Mr Rosenberg was commenting on Statistics New Zealand's labour cost index which rose 0.4 in the three months ended June, taking ordinary-time wage rates to annual growth of 1.6%.
The index showed that the 0.5% increase in private sector all salary and wage rates was marginally stronger than the Reserve Bank's June forecasts.
However, public sector wage growth continued to slow, with the 0.2% increase in ordinary time wage rages taking it to annual growth of 2.1% - the lowest annual increase since September 2001.
ASB economist Jane Turner said that was not surprising in light of announcements from the Government of cutbacks to various departments over the past year.
"Looking at the distribution of wage increases, there was an increase in the proportion of workers who had a wage increase over the past year, particularly in the proportion of workers who had a wage increase of up to 3%."
The index pointed to a "tentative recovery" in wage growth from the low levels of last year, she said.
Given wages were a lagging indicator of the economy, the results yesterday reflected the weak state of the labour market during the course of the recession.
An expected continuing improvement in the demand for labour would flow through to stronger wage growth in the coming year, Ms Turner said.
Mr Rosenberg said many people had experienced wage freezes during the past two years.
They would now be looking with concern at the high inflation forecast for next year, due partly to Government policies including GST and emissions trading.
Also released yesterday was the quarterly employment survey on average earnings, which tended to be more volatile than the labour cost index.
The 0.6% in private sector average hourly earnings was in line with forecasts.
Ms Turner said the survey pointed to strong labour demand in the three months ended June.
Total paid hours increased strongly for the second consecutive quarter.
Paid hours were now up 2.5% on levels a year ago.
The survey could provide a rough guide on employment growth data due out tomorrow.
"Overall, we are comfortable with our unemployment rate forecast of 6.3% while the market expectation is sitting at 6.4%."
The data releases yesterday should increase the Reserve Bank's confidence a "respectable" recovery was continuing to take place, Ms Turner said.
