RPT-NZ employment confidence slides in Q1 - survey

WELLINGTON, April 1 (Reuters) - New Zealand workers' confidence dropped sharply in the first quarter of 2008 as fears increased about the health of the economy, a survey showed on Tuesday.

The Westpac-McDermott Miller employee confidence index fell to 128.8 in the three months to the end of March from 133.5 in the previous quarter, the biggest decline in the series' history.

A reading above 100 indicates more optimists than pessimists.

"Employment confidence is coming under increased pressure as uncertainty around the economic outlook heightens," Donna Purdue, senior economist at Westpac Bank, said in a statement.

"Talk of recession, rising business pessimism, and a sharp correction in the housing market, all suggest that the previously incessant demand for labour will moderate."

The index fell for the second quarter in a row after hitting 135.9 in the three months to September, which was its highest level since the survey began in June 2004.

The survey is the latest pointing to a weakening economy after Monday's National Bank of New Zealand monthly business outlook hit its lowest level in 17 years, and last week a survey showed consumer confidence at its lowest level in a decade.

The Reserve Bank of New Zealand lifted interest rates by a total of 1 percentage point in 2007 to a record 8.25 percent on concerns over the robust housing market and strong domestic demand.

The central bank has said it sees rates remaining on hold until the middle of 2009.