More than 32,000 New Zealanders lost their jobs last year as the Reserve Bank (RBNZ) crushed economic activity and forced runaway inflation back into the target band.
The unemployment rate hit 5.1% in the final quarter of 2024, its highest level since the covid lockdowns in 2020 and a period of migration-fueled economic growth in 2016. There are now 156,000 people looking for work, a 27% increase from a year ago and up 5% during the quarter.
A Stats NZ spokesperson said the annual drop in employment was the largest since 2009, when the Global Financial Crisis caused an international recession and job losses.
The weakness in the labour market has been driven by the RBNZ tightening monetary policy to reduce economic activity and bring down inflation. Unemployment hit a record low of 3.2% during 2022 as firms hired additional staff and raised prices to meet consumer demand.
High interest rates have reversed that trend, with households cutting back on spending to meet mortgage repayments, stabilising prices and forcing firms to cut staff.
While the headline unemployment rate has been rising, it has been moderated by workers leaving the labour force. The rate is calculated as a percentage of those available for work, not the overall working-age population.
The labour force participation rate dropped to 71% in December, down from a record high of 72.4% in 2023, while the employment rate fell to 67.4%, down from a peak of 69.8%.
Michael Gordon, a senior economist at Westpac NZ, said the fall in participation has absorbed much of the softness in the job market over the past year.
“Much of the current cycle in employment has been driven by young people, who were drawn into the workforce in 2021 and 2022 when the labour market was tight and migrant workers weren’t available. As those conditions have reversed, many of them are ending up back at school rather than continuing to look for work,” he said in a note.
Another broader measure of labour market strength is the underutilisation rate, which measures the proportion of the labour force that either has no job or not enough hours. It fell to a record low of 9.1% in 2022 but has risen to 12.1% as of December 2024.
Weakness in the job market has translated into slower wage growth. The labour cost index (LCI) showed worker pay increased by 3.3% in 2024, down from 4.3% the year prior, while average hourly earnings rose by 4.2% to $42.57 — compared to a 6.9% increase in 2023.
In a note prior to the release, Gordon said slower wage growth was “not exactly something to celebrate but it’s an unfortunately necessary step in breaking the cycle of domestically-generated inflation”.
And, in comments made shortly after the release, ASB senior economist Mark Smith said the labour market is expected to continue to soften given a subdued outlook for economic activity and likely cost cutting by firms struggling to rebuild "battered profitability".
"We do not expect to see discernible signs of improvement in hiring until well into 2025. A modest pick-up in hiring is then expected towards the end of this year, but we envisage that firms will carefully manage employee headcount given the uncertain and volatile outlook," he said.
"...The RBNZ will be wary of the wider economic, social, and labour market costs from keeping overly restrictive OCR [Official Cash Rate] settings for longer than is necessary. A front loaded pace of policy easing remains appropriate for now, with another 50bp OCR cut expected in February (to 3.75%). With the OCR moving much closer to neutral settings (likely to be in a 3 to 3.5% zone), the RBNZ will then slow the pace of adjustment, with the OCR hitting 3.25% by mid-year. The OCR outlook for 2025 is highly uncertain, with both upside and downside risks to the labour market and economy in general," Smith said.
99 Comments
This should surprise no one. Orr said he would manufacture a recession and this is part of it.
Unfortunately it will also reduce wage growth further eating in to our standard of living. Next cab off the rank to go is overseas travel, then the luxury of a second car....
Pretty pleased with this forecast. My 5% unemployment rate was right as well if I claim (falsely) that I was estimating the actual figure rather than the seasonally adjusted one!
The number of people not in the active labour force has increased by around 90,000 in the last 2 years. This is suppressing the unemployment rate (same happens every recession btw). So, watch the employment rate figure this week. We have negative job growth of around -2% so employment numbers will definitely be falling. I would expect an employment rate of about 67.4% - down from 69.8% at the peak.
NZ's monetary settings have no effect on growth. Our problem is more structural. Specific problems being but not limited to an aging population, terrible taxation policy and terrible government expenditure policy.
Honestly the only thing holding the country together is the fact that Kiwi's seam to have an excellent work ethic.
Uhhh, no. If it were, with higher listings, slow sales, flat to falling prices, and less building, the unemployment rate would be a hell of a lot higher than 5%.
Hence a lot of the "solutions" to our economic woes put forward on interest, aren't actually going to have the effect people think. Otherwise, countries with DTIs, CGTs etc would be doing far better than they are.
RBNZ MPS November 24:
Recent weakness in economic activity is assumed to flow through to further weakness in labour market conditions, with the unemployment rate projected to increase further to a peak of 5.2 percent in the March 2025 quarter. The unemployment rate is then assumed to steadily decline in line with the forecast recovery in GDP growth.
Tried that, same outcome.
If someone leaves they reduce the demand for jobs, but also the need for jobs (as they aren't consuming services etc). On top of that a mass exodus reduces economic sentiment. So I would say people leaving increases the unemployment rate.
That's a much longer term effect than being made redundant and likely going on job seeker benefits, if they don't leave. So many people I know that have been made redundant or whose work dried up recently either have already left (about 80% for Aus) or are about to. And most of them are young people we reaaallly don't want to lose, much of them highly skilled and educated.
If they are unemployed, their contribution to overall economic activity is reduced though comparative to if they were employed.
That is to say, if they stayed, their contribution to economic activity is not proportionate to their "contribution" to the stats.
So we get better stats in both employment metrics and economic activity per capita when they leave.
And if they "make it" where they go, it's a win-win!
a lot of people made some good coin
Especially ones who benefited from low interest rates.
Reducing spending is the counter to unsustainable stimulus and if you plan to remove the stimulus it's necessary.
We were not tough on anything in the last coalition, murderers on home detention, ram raids, we were too soft. and now that someone wants to put their foot done on it people think we are being too harsh.
Public sector wage increases were 50% higher than the private sector, we rely on the government for everything, including getting us out of this mess.
Funny how Orr is blamed for getting us in the mess when it was actually Grant and Jacinda yet people blame Luxon for not doing enough to get us out.
Easily confused...NZ occasionally / frequently charges murderers with manslaughter & drug driving causing death to achieve convictions in our excessively lenient legal system.
https://www.rnz.co.nz/news/national/537323/waikato-woman-drove-high-on-…
https://www.nzherald.co.nz/rotorua-daily-post/news/drugged-rotorua-driv…
No one forced these people to take illegal drugs & drive while intoxicated
https://www.legislation.govt.nz/act/public/1961/0043/latest/DLM329302.h…
160Culpable homicide
(1)
Homicide may be either culpable or not culpable.
(2)
Homicide is culpable when it consists in the killing of any person—
(a)
by an unlawful act; or...
What would be murder in any other country is reduced to manslaughter in NZ. You can literally hunt down a complete stranger and beat him to death, and its considered "manslaughter" here. Sentenced to 11 months home detention - not even the full 12 months available.
https://www.stuff.co.nz/nz-news/360569193/they-were-sending-loved-ones-…
5 months home detention for this one who kicked a 65 year old man to death
https://www.nzherald.co.nz/nz/christchurch-teen-mark-nagel-who-killed-m…
But on the subject of rape, a 5 times serial rapist and sexual offender got 9 months home detention.
https://www.theguardian.com/world/2022/oct/20/nz-court-rejects-appeal-a…
Public sector wages run in different cycles to private, you can easily cherry pick unusual years. 50% higher is not representative of Labour's term. I know our negotiations under Labour were terrible.
"Since March 2018, wages in the public sector grew 24.5% compared to 20.3% private growth."
https://www.nzherald.co.nz/nz/public-sector-wages-grew-faster-than-priv…
Who benefited from the low interest rates? The first home buyers who might now be in negative equity? The banks who were able to flood the economy with more debt?
Orr, his predecessors and monetary policy did get us into the mess. But it was ultimately the people buying into the wealth effect/illusion that has created the collective mess. It was the people demanding more.
What exactly is Luxon trying to get us out of?
Indeed, have a work mate who has been down for 2 weeks with it and is getting so pissed off about the situation its not funny (an extrovert that normally visits clients, but can barely get out of bed). Also a family member who got it first time last year, now appears to have long COVID and seems to be getting very depressed about it. Normally a high performer and very sporty.
The increase in unemployment is to be expected, and I am sure it is actually much higher as many job seekers are not registered anywhere just yet. My pick is that the true figure is around 7% at least..
it is the virtually collapse of the building industry which is largely to blame. As building slows, a myriad of trades have little or no work which has a knock on effect right through whole of society. The disasterous drop in house values further suppresses demand as new build houses cannot compete with second hand homes being sold next door.
The government and the Reserve Bank should take heed of the situation lest it turn into a fully fledged recession which will only makes things worse. The government drive to cut costs, meritorious as it is, may turn into an unstoppable cascade forming a bigger problem than the excesses that already exist.
A drop in interest rates can help, but as the effect takes a long time to be felt, it is useless in what is obviously a looming problem that is arriving soon in a suburb near to you.
The government drive to cut costs, meritorious as it is, may turn into an unstoppable cascade forming a bigger problem than the excesses that already exist.
Entirely expected when you look at the calibre of Luxon and Willis, and before them Ardern and Robertson. How about Treasury, who has been running them over the past 6 years? Then we have RBNZ and Orr. The 6 horsepeople of the apocalypse.
As much as I really can't warm to Statler and Waldorf, at least they can see things are munted and trying to get some projects going.
Not going to happen though is it?
Especially when land is reclassified as an investment and not consumption per central bank economist thinking, and the accompanied mantra that we're not making any more land.
It's likely that we need a real recession in asset inflation. Not likely to happen by choice when the systems, policies and beliefs are structured towards price growth.
The government and the Reserve Bank should take heed of the situation lest it turn into a fully fledged recession which will only makes things worse
The real estate market is to big for direct intervention, those who have made profits will act to secure as much as then can.
If you accept that perhaps its overvalued, then I do not believe you can stop the tide of sellers until we get back to fair valuation?
While some investors may simply hold and not mark to market, Many of these homeowners hold MOST of their retirement equity in their house and the quality of that retirement is dependent on a downsize sale being achieved before the equity evapourates.
We live in interesting times.
.
So we have rising unemployment, slowing inward migration, record levels of Kiwi's leaving, interest rates falling but may bottom out soon, risks of more inflation globally, loads of property coming on to the market and a tough economy that will take some time to recover. Sounds like the property market might be in for a bit more downside this year.
Yet the pricing of homes, the "value" of land, the introduction of new money into the economy via this model, has a massive impact on not only The Economy but on many individual's well-being and health.
The social engineering that we've discussed has a massive impact on many individuals ability to not only see the alternatives, but also to take right action towards an alternative.
How does one get out of the programming if they're unable to see it? And even if they can see it, where do they go for guidance and support, when the majority are in the same programming?
People will only see and recognise the folly of their programming if they're prepared or willing to see it. It's not really up to anyone else to do that for them.
The alternative becomes very problematic, because only the very committed will totally extracate themselves from the system, and instead will need to continue interacting with it.
There's some simple and easy first steps, stop being a consumerist, and get busy producing stuff (rather than waiting for someone else to incentivise it).
We don’t seem to be having the same problems in Christchurch?
Christchurch I see has been voted as the greatest city in New Zealand!!
Exactly what I have been saying for years.
This was from a research company Ipsos, which asked people from 8 places around the country how happy they were with their city and quality of life last year.
It doesn’t come as a surprise really, as we all know but some will not admit it, that Chch offers so much more than all the others for lifestyle living and continues to do so into the future.
Source? For overall quality of life, Dunedin > Wellington > Christchurch according to this survey:
https://www.qualityoflifeproject.govt.nz/wp-content/uploads/2025/02/Qua…
I relocated from Christchurch to Nelson late last year due to work and while Nelson is lovely and the fishing is better, Christchurch is far superior
We were there for 10 years and it was a fantastic place for our children to be teenagers (in their early twenty's now)
I worked in the CBD which was great so accessible and an easy commute I also found it vibrant and food options fantastic and Imo it will only continue to improve.
The housing stock in general is in great condition in CCH (earthquake repairs and refurbs)
We have been looking in Nelson for 4 months now and it's all a bit sad and the vendors are not yet meeting the market. The slope instability and flood issues putting a bit of a dent in our confidence for houses we may have otherwise purchased
Both the children are in Wellington, so I visit there regularly and that is a city in decline :( Sad for my husband to see as he grew up there and has such fond memories
I grew up and lived through to my 30s in Auckland and could never live there again (yes traffic and awful CBD) so feel I can confidently say Christchurch is far and away the best out of AKL, WLG, CHC.
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