WELLINGTON, May 9 (Reuters) - New Zealand's unemployment rate fell to a three-year low as rebuilding after the Christchurch earthquake helped add a record number of jobs, but softness in the broader labour market means interest rates are still seen on hold.
The economy gained 38,000 jobs, or 1.7 percent, in the March quarter, the highest since the series started in 1986, with the labour participation rate rising to 67.8 percent, according to official data on Thursday.
The unemployment rate fell to 6.2 percent, the lowest since March 2010, from a revised 6.2 percent in the previous quarter. A Reuters poll forecast a 6.8 percent unemployment rate and jobs growth of just 0.8 percent.
Statistics New Zealand said jobs growth would have been more muted without a solid lift in employment in the Canterbury region, which was hit by a devasting earthquake in 2011, where the jobless rate fell to 4.3 percent.
Analysts said that it was a positive sign that the volatile figures showed a broad pick-up, but they added that job growth outside Christchurch was still modest, while the overall jobless rate remains high.
'An unemployment between 6 and 7 percent is still pretty elevated for New Zealand, so I would caution against getting carried away by these numbers,' said Su-Lin Ong, senior economist at RBC Capital Markets.
New Zealand's economy has gathered momentum after a soft patch in the middle of last year, boosted by high commodity prices and a pick-up in the pace of rebuilding in Christchurch.
The New Zealand dollar jumped to a session high of $0.8470 after the data from around $0.8415 beforehand, before settling back to $0.8450. Interest rate futures edged down slightly.
Market pricing based on overnight indexed swaps implies a 6 percent risk of a rate cut next month, and only 8 basis points of rate rises are seen over the next 12 months.
Full time employment grew 1.7 percent during the quarter, with part-time employment rising 1.3 percent.
Jobs were added in the construction, retail and telecommunications sectors, as well as manufacturing, professional services, and arts and recreation.
There were small losses for wholesale industries, public administration, and agriculture sectors.
The New Zealand economy grew at its fastest pace in three years in the last quarter of 2012, and is seen expanding at an annual rate of about 3 percent for the next couple of years.
The RBNZ has said that in the current environment of low inflation, a high exchange rate, and modest local growth impacted by drought, it expects to hold its cash rate at a record low 2.5 percent for the rest of the year.
A Reuters poll has analysts picking the next move as a rise, either towards the end of this year or early 2014.
Earlier this week, wages and partial employment data showed a 0.4 percent rise in total filled jobs but no change in total paid hours in the first quarter.
The ANZ Bank's job advertisements series rose in March, but the series has suggested for some time a jobless rate of around 7 percent for the next six months.
(Reporting by Gyles Beckford; Editing by Richard Pullin) Keywords: NEWZEALAND ECONOMY/JOB
(Gyles.Beckford@thomsonreuters.com)(+64 4 802 7980)(Reuters Messaging: email@example.com)
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