The New Zealand Dollar is practically flat against the US Dollar on Wednesday, trading at 0.6040 at the time of writing, after being rejected at 0.6063 on Tuesday. A string of mixed New Zealand employment figures has halted the pair’s recovery from weekly lows at 0.5990.
New Zealand’s economy created more jobs than expected in the last quarter of 2025. The Employment Change grew 0.5%, from a flat reading in the previous quarter, and almost twice as much as the 0.3% anticipated by market analysts.
The impact of these figures, however, has been offset by the unexpected increase in the Unemployment Rate, which hit a decade-high of 5.4%, against the market consensus of a steady 5.3% reading. Beyond that, Labour costs eased against expectations, paving the path for the Reserve Bank of New Zealand (RBNZ) to keep its monetary policy unchanged for the foreseeable future.
The US Dollar, on the other hand, remains steady, supported by the end of a two-day partial government shutdown, with investors still digesting the nomination of Kevin Warsh as the next Federal Reserve (Fed) Chairman, which halted the US Dollar’s sell-off last week.
In the US economic calendar, the focus today is on the ADP Employment Change, which is particularly relevant as Friday’s key Nonfarm Payrolls report will be delayed due to the government shutdown. Net employment is expected to have accelerated to 48K in January from 41K in December, but it remains relatively low.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.