By Tracy Withers Nov. 6 (Bloomberg) -- New Zealand's jobless rate rose to the highest in almost five years in the third quarter, adding to signs of a prolonged recession that is prompting companies to cut production and fire workers. The unemployment rate increased to 4.2 percent from 3.9 percent, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. The median estimate of 12 economists surveyed by Bloomberg News was for 4.3 percent. Rising unemployment will curb consumer spending and adds to signs New Zealand will post its worst gross domestic product result in 10 years. Prime Minister Helen Clark, trailing in opinion polls before a Nov. 8 general election, said this week she is prepared to borrow to pay for housing programs and rail construction projects that will protect jobs. ``The bad news is yet to come,'' said Stephen Toplis, head of research at Bank of New Zealand Ltd. in Wellington. ``It hasn't got to a level where it is causing grief, but where it is going to is certainly worrisome.'' Toplis expects the jobless rate will rise to 4.6 percent by Dec. 31. The central bank has forecast a 5.6 percent by early 2010. New Zealand's economy contracted in the first two quarters of the year and probably shrank in the three months to September, according to central bank and Treasury forecasts. Bollard last month said full-year growth will be slower than the 0.6 percent pace he forecast in September. Economic Managers There's no point watching unemployment ``go through the roof if you have the capacity in the short-term to invest for the future and get your people productively engaged,'' Clark told Radio New Zealand on Nov. 4. New Zealand's main opposition National Party was rated the better manager of the economy by 49.6 percent of 700 voters polled last week, ahead of Clark's Labour Party on 40.7 percent, the New Zealand Herald reported today. The highest unemployment rate since December 2003, when it was 4.6 percent, will ease pressure on wages and slow spending, justifying Reserve Bank Governor Alan Bollard's decision to start cutting interest rates. Bollard has lowered the benchmark interest rate by 1.75 percentage points since July and will probably cut by at least another half point in December to bolster confidence and demand, economists say. ``You have a weak recessionary economy, rising unemployment, and a very weak global backdrop,'' said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. ``The Reserve Bank of New Zealand will still cut rates further and these numbers are consistent with further easing.'' Business Confidence New Zealand's dollar bought 59.72 U.S. cents at 1:25 p.m. in Wellington trading from 59.71 cents immediately before the report was released. Employment rose 0.1 percent, or about 3,000 jobs, in the third quarter, the statistics agency said. Economists expected employers would shed 13,000 jobs. Employment increased 1 percent from a year earlier. Business confidence has slumped amid global financial market turmoil that has slowed the world economy. In October, confidence had its largest reversal on record, ANZ National Bank Ltd. said last week. The same survey showed 30 percent of companies plan to fire workers in the next year. Fletcher Building Ltd., the nation's biggest building materials company, has fired 600 of its 9,000 workers in the past three months as home construction slows. Lumber Sales Carter Holt Harvey Ltd. last month announced the loss of 316 jobs at two sawmills as it cuts costs because demand for lumber is slowing. ANZ National said in September it is reviewing staffing levels at its branches amid a decline in teller transactions. The nation's largest bank is also freezing recruitment and reducing the use of casual workers, it said. The participation rate, which measures the proportion of the population working or seeking employment, rose to a record 68.7 percent from 68.6 percent in the second quarter. Full-time employment rose by 8,000 jobs, or 0.5 percent, in the third quarter after seasonal adjustments. Part-time employment declined by 2,000 jobs, or 0.5 percent. Statistics New Zealand adjusts the full-time and part-time employment figures separately, which means they may not add to the total change in employment. To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

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