Wednesday's Asia Economic Calendar: NZ Labour Data, China PMI

Data from RatingDog's PMI survey comes after the official and manufacturing PMI releases earlier this week.

• For more detail on those, see Monday's wrap-up: Asia-Pacific market news roundup covering oil's easing on Doha talks

New Zealand's third-quarter labour market report is scheduled for release at 10:45 a.m. local time.

Here is what economists are predicting for the data.

Estimates vary between 5.4% and 5.6%. The jobless rate in the June quarter was 5.6%, the highest level seen since September 2015. Westpac predicts a 0.5% rise in employment and a dip in the unemployment rate to 5.5%. ANZ forecasts a 0.3% increase in employment with the rate holding at 5.6%. ANZ's forecast of no change is based on the idea that a rise in the labour force participation rate will absorb the additional jobs. The Reserve Bank of New Zealand's September projection was 5.5%. Wage pressures are anticipated to remain subdued. Private sector labour cost growth is seen at roughly 2.1%, which analysts say is close to its lowest in four years.

Implications for the Reserve Bank of New Zealand

On October 28, the RBNZ surprised financial markets by keeping the official cash rate at 2.75% on a 4-3 vote, when a 25-basis-point increase had been nearly fully priced in. The majority of committee members cited third-quarter inflation that was weaker than anticipated, stable inflation expectations, and restrained wage growth. That makes the wage data from today particularly significant. Westpac still anticipates a rate hike on December 9, but notes it is not certain and describes today's figures as the first critical piece of information. ANZ also continues to predict a move in December.

Implications for the New Zealand dollar

Following the RBNZ's decision, the Australian dollar-New Zealand dollar cross rate surged to a cyclical peak near 1.26, as interest rate differentials pressured the kiwi while the Reserve Bank of Australia adopted a more hawkish stance.

• Hawkish scenario: if unemployment falls to 5.4% or 5.5% and wages pick up, it would probably renew expectations of a December rate increase and provide some support for the New Zealand dollar.
• Dovish scenario: if the jobless rate stays at 5.6% and wages remain soft, that would back the dovish members of the RBNZ and keep the kiwi exposed to downside.

The labour force participation rate is the key variable. An increase in participation could keep the headline unemployment rate unchanged even if employment is expanding.

Additionally, New Zealand heads to the polls on Saturday, November 7. Policy expectations could change if a Labour-led government appears probable, given its declared goal of reinstating the Reserve Bank's dual mandate.