Unemployment Hits Near Five-Year High, Job Market Shows Signs of Strain

Wage growth slows, underutilisation rises, and economists warn of tougher times ahead

Unemployment in New Zealand has edged up to 5.2 per cent in the June quarter, a near five-year high, as hiring slows and wage growth continues to lose momentum, according to new data from Stats NZ.

The figures show the labour market is weakening, with 2000 jobs lost during the quarter and 16,000 fewer jobs over the past year. While full-time employment rose slightly, part-time roles declined, and the broader underutilisation rate — which includes the unemployed and underemployed- climbed to 12.8 per cent, its highest since 2020.

"This data confirms labour market conditions have changed considerably in recent years," said Jason Attewell, Stats NZ’s labour market spokesperson. “Since June 2022, the unemployment rate has increased by 1.9 percentage points.”

The 5.2% jobless rate — up from 5.1% in the previous quarter, came in just under market expectations but still reflects an economy under strain. Economists suggest the numbers understate the extent of labour market weakness.

BNZ’s head of research, Stephen Toplis, noted that the unemployment rate looked deceptively stable. “The drop in participation is people who have either given up looking for a job, because it's all too hard, or who have gone back to get further education,” he said. “Had it not done so, the unemployment rate could have been substantially higher.”

Wage growth, too, showed signs of deceleration. Stats NZ said overall wage growth slowed to 2.4 per cent, down from 2.9 per cent in the previous quarter.

Finance Minister Nicola Willis acknowledged the figures were “not satisfactory” but expressed optimism. “Treasury forecasted 8000 more people would be unemployed by now, so these results are better than expected,” she told reporters. “That is not to say we are satisfied, we are concerned for every New Zealander who wants a job and can’t get one.”

Willis pointed to upcoming infrastructure projects and private sector investment as part of the government’s recovery strategy. “$6 billion in public infrastructure investment between now and Christmas will mean real jobs behind real spades,” she said.

Economists remain cautious. ANZ senior economist Miles Workman warned that businesses still holding onto staff may soon be forced to cut jobs if recovery expectations fall short. “If that were to happen, we estimate the unemployment rate could rise about 0.5 percentage points higher than the Reserve Bank’s current forecast,” he said.

The Reserve Bank had predicted 5.2% would be the unemployment peak for the year, with a gradual decline from September. With this forecast being met, economists now strongly expect a 25 basis point cut to the Official Cash Rate (OCR) to 3.0 per cent on August 20. Some forecasts even suggest a further cut to 2.75 per cent by early next year.

Despite global uncertainty, including the impact of new U.S. tariffs, Willis said the government would continue to invest in essential services while aiming to balance the books in the long term.

“We have a $10 billion deficit this year, which will grow next year, because this is not the time to stop spending on health, education, and police,” she said. “But every New Zealander knows, you can't borrow forever.”