First-quarter labour data is expected to show some rebound from weakness seen in the previous quarter and reflect a historically low unemployment rate.
The low unemployment rate does not bode well for sectors in Otago and Southland, both in manufacturing and the service provider sector, which have been plagued by shortages of unskilled and skilled staff for more than two years.
The StatsNZ household labour force survey is due out tomorrow.
ASB chief economist Nick Tuffley was picking the unemployment rate would ease back slightly to 4.2% of the labour force; the same expectation of the Reserve Bank.
"Our expectation's that the labour market will remain tight over 2019, but that wage growth will fail to fire sufficiently to push medium-term inflation higher,'' he said in a statement.
"We expect the labour market to remain tight given slower growth in the labour supply,'' he said.
He expects the unemployment rate to "hover'' around 4% by late 2019.
Economists don't expect much change in the employment picture for the March quarter, with rising wages doing little to push up consumer prices, keeping the prospect of official cash rate (OCR) cuts alive, BusinessDesk reported.
The March quarter unemployment rate was 4.2% versus 4.3% in the December period, according to the median of economists polled by Bloomberg.
Private sector wage inflation, including overtime, is forecast to be 0.5% in the three months through March versus 0.5% growth in the prior quarter.
The central bank has a dual mandate to support maximum sustainable employment and keep annual consumer price index (CPI) inflation between 1% and 3% over the medium term, with a focus on the mid-point of 2%.
Annual inflation was 1.5% in the March quarter.
Meanwhile, the labour cost index is expected to have increased an annual 2% in the March quarter, an unchanged annual pace from the December quarter. Average private sector wages rose an annual 3.7% to $29.66 an hour in the December quarter.
Business confidence surveys show firms have bemoaned the rising cost of wages and difficulty of finding skilled staff for several years.
More recently, they've complained about an inability to pass on those costs to consumers, and are bracing for profit margins to get squeezed.
Reserve Bank governor Adrian Orr cited a slowing local economy and weaker global outlook when he surprised investors at the March review, shifting the central bank from a neutral stance to saying the next likely move was a rate cut.
While some economists expect a cut as early as next week, others say August is more likely, in particular given the May 8 monetary policy decision and statement is the first that will be published by a new committee, which includes three external and four internal members.
Westpac Bank senior economist Michael Gordon expects the unemployment rate will have lifted to 4.4%.
"That would still leave it close to the RBNZ's estimates of the maximum sustainable rate of employment, but the RBNZ would be concerned if it were heading in the wrong direction,'' he said.
ANZ Bank New Zealand economist Michael Callaghan expected the unemployment rate to be 4.3% in the March quarter and said "improvement in the near term seems unlikely with GDP growth subdued.''
He tipped private sector wage inflation to be about 2.1% year on year, not including overtime, reflecting previous tightening in the market and minimum wage increases.
"A stable or slightly lower unemployment rate should set the scene for the RBNZ to deliver a downward-sloping OCR track at the May MPS, in line with our expectation for an August rate cut. A higher unemployment rate and subdued wage inflation would add to the risk of a rate cut as soon as May,'' Mr Callaghan said. - Additional reporting BusinessDesk
