Data this coming week could reveal New Zealand’s unemployment rate has hit its highest point in 11 years.
Statistics NZ's labour market data for the June quarter is due out on Wednesday, August 5, and will show just how much the jobless rate climbed over those three months.
NZ’s March quarter unemployment rate was 5.3%, with 163,000 people officially unemployed. If it reaches 5.5% or higher, it will be the highest for more than a decade.
The Reserve Bank (RBNZ) anticipates the jobless rate will have inched up to 5.4%. In its May Monetary Policy Statement (MPS), the RBNZ projected the unemployment rate would “remain near this level until mid-2027.”
“We expect this to occur as firms’ margins are compressed, and the rate of hiring slows while the population continues to grow. Total employment is projected to remain broadly unchanged in the June 2026 quarter, before beginning to grow again,” the RBNZ said.
In the March quarter, NZ’s unemployment rate edged down from 5.4% to 5.3%. As measured by the Household Labour Force Survey (HLFS), the number of unemployed people fell to 163,000 from 165,000 in the December quarter. But there were still 7,000 more unemployed people in March compared to a year earlier.
The unemployment rate hasn’t been below 5% since September 2024. The last time it dipped below 4% was in September 2023.
Where will it go?
For the June quarter data, economists are either expecting the jobless rate to remain flat, or forecasting it will jump higher.
BNZ and Westpac NZ economists have matched the RBNZ’s projections and believe the unemployment rate will tick up to 5.4% in the June quarter.
“A larger-than-expected participation dip could prevent the unemployment rate from pushing higher,” BNZ senior economist Doug Steel said.
The participation rate is the percentage of the working-age population employed or actively looking for work. In the March quarter, the participation rate was 70.4%. The RBNZ is forecasting a participation rate of 70.3% in the June quarter.
BNZ is forecasting 2.0% annual growth in the private sector Labour Cost Index (LCI), matching the March quarter. The LCI measures changes in salary and wage rates for a fixed amount and quality of work. The LCI came in at 2% in the March quarter.
Steel said that higher oil prices and renewed upward pressure on domestic fuel prices have raised the risk of inflation staying close to 4% through the rest of 2026.
Annual inflation, as measured by Statistics NZ’s Consumers Price Index (CPI), increased to 4.1% in the June quarter – the highest annual inflation rate NZ has seen since it hit 4.7% in December 2023.
“We continue to see near-term inflation above the RBNZ’s July Monetary Policy Review (MPR) estimates. The longer inflation stays outside the Bank’s target band, the greater the risk it becomes entrenched. The RBNZ will be keen to avoid that, so we continue to expect further removal of monetary stimulus,” Steel said.
“It remains anyone’s guess as to how the situation in the Middle East evolves.”
Lack of momentum
Like BNZ, Westpac is matching the RBNZ’s unemployment rate forecast of 5.4%. Senior economist Michael Gordon said the jobs market had held its ground through the Middle East conflict but hadn’t gained the momentum Westpac would’ve hoped to see.
While households are still struggling with cost-of-living pressures, he said the existing degree of slack in the labour market is a “crucial difference” between the current environment and the surge in wage growth that NZ experienced post-Covid.
Because of this, Westpac expects a 0.6% rise in the LCI for the June quarter, keeping annual growth just below 2%.
According to Gordon, a 0.1% rise in employment wouldn’t be enough to keep up with the growth in the working-age population, which has an already-reported 0.3% rise for the quarter.
“That means we’ll likely see some combination of people either moving into unemployment or dropping out of the active labour force. That said, we’re talking about small increments – we expect a 0.1ppt rise in the unemployment rate to 5.4%, and a 0.1ppt fall in the participation rate to 70.3%.”
A ‘relatively soft’ picture
ANZ NZ and ASB economists are anticipating a slightly higher increase to the unemployment rate next week, forecasting it will rise to 5.5%.
This would take NZ to the highest level of unemployment the country has experienced since the June 2015 quarter, 11 years ago.
ANZ senior economist Miles Workman said the labour market data is expected to paint a “relatively soft picture of the labour market” as firms will have “pressed the pause button” during the June quarter due to spiraling oil prices and heightened global uncertainty.
“For the RBNZ, this suggests that the labour market is unlikely to become a renewed source of accelerating CPI inflation pressures any time soon,” he said.
ANZ also expects ongoing slack in the labour market to keep wage pressures contained, with annual wage growth measured by the LCI slowing 0.1% to 1.9%.
“While contained wage growth is not good news for households facing acute cost-of-living pressures, it does mean that wage-price spiral risks are mitigated, reducing the likelihood that the RBNZ will need to lift the OCR into outright restrictive territory (that is, well beyond 3%),” Workman said.
ASB also agrees that the June quarter labour market figures are likely to remain soft, despite tentative signs that the pre-Middle East conflict recovery was flowing into employment.
ASB economist Wesley Tanuvasa said the “size and persistence” of the Middle East cost shock remain uncertain, particularly given how fluid US–Iran developments are right now.
“Next week’s employment figures may show some improvement, but the overall story is that the labour market remains soft and Kiwi households have done it tough over the last economic cycle,” he said.
ASB expects the figures to show the participation rate has held at 70.4% and for the LCI to come in at 2% for a third quarter in a row.
No huge spikes
Kiwibank expects the June quarter labour market data to reflect the soft start to the year and for the unemployment rate to remain at 5.3%.
Kiwibank economist Alexandra Turcu said the increase in filled jobs over the quarter is likely to largely be eaten up by positive net migration and growth in the working age population. The bank's economists expect an employment rate of 66.3% – down from 66.7% in the March quarter – and the participation rate to be 70.1%.
Kiwibank anticipates wage growth to “track sideways” in the June quarter, and for the LCI will come in at 2.1%.
“The soft demand for labour, coupled with plenty of job seekers, will keep the lid on wage growth too,” Turcu said.
“Therefore, we aren’t expecting a huge spike in unemployment. In fact, we don’t expect to see much movement at all.”
8 Comments
One thing we can be sure about is when these figures are released by Stats NZ they will not show the true picture, they would have been massaged and "seasonally adjusted " to conceal the real picture about the lack of employment in NZ. Ask anyone who is either skilled or unskilled and trying to find a job in NZ. You will get the true picture then.
Was 3.9% before National fixed our economy
But Luxy told the kiwi battler mother, struggling with a disabled child, "don't worry, we go this" a "strong economy lifts all boats"
- Yet we all know too well, the Lux is sorted.
The struggling mum walked away dazed, confused and wondered where her boat was?
Was a contradiction all along.. promising they'd get more people into jobs, whilst campaigning on public job cuts
Lux flakes Luxon is sure to wash away the despair of the unemployed job seekers and low wage workers who won't get pay increases before the next general election, despite >4% inflation, > 8% rates increases and >12% electricity price rises. He will suds it away, suds it away... just believe in him and vote for him at the next general election
1988= 5.2%
1991 = 11.2%.
2001 = 5.4%.
Fairly straight lines in between those but steep on the up slow on the down.
Im not concluding or attempting to imply anything. Was just comparing times when it was 5% outside the "highest in a decade" headline.
As a distant, but very interested, observer, I ask...what is going on in NZ re. its economy, and is it following a similar pattern to the UK?
In the UK, the economy bounced back somewhat after lockdown, but has since been stuck with marginal GDP growth, very much supported by Government. UK public debt to GDP is close to 100%.
Inflation, very much the result of lockdown policies, took off from late 2021 and has caused total havoc (especially re.the rise in base rates to tackle it), despite it recently falling back. Domestic energy prices have risen hugely since 2015, although that relates mainly to Net Zero policies in the UK. Prior to the Iran conflict a litre of fuel at the pump was the same as in 2015.
We had a housing boom during Covid, that is now over and if you want to sell you will have to accept a discount, in most cases. That makes sense as Covid impoverished the nation, so why should housing be more expensive than in 2019!
The killer is base rates. They are now close to 4%, whilst over 2009-2021 they were close to zero, housing is thus rendered unaffordable for first time buyers as mortgage rates are around 5.5% compared with 2.5% pre 2020.
From memory NZ base rates were always above those of the UK pre 2020, that has now reversed.
The general outlook in the UK is one of persistent marginal GDP growth, and flat GDP per-capita. The latter is key: up just 8% since 2008. Compare that with growth of 25% in the 80s and 90s decades (that is 25% each decade). To the extent that real GDP per-capita growth oils the wheels of a market economy, the situation concerning per capita GDP is worrying. What is the picture for that in NZ?
Any thoughts?.
Perhaps a trend of less people willing to take on a business or start one? For NZ at least, considering it is far easier to pull equity from the family home to get startup cash than it is to get any form of business loan, there's the possibility that if housing is too expensive, less people are willing to take that risk as they would then not be easily able to buy again in future.
Either way, we have had increasing regulation in so many sectors over time which will also stifle business growth (an example for the UK could be the council hassles on Clarksons farm), which will be better for maintaining the environment, but add additional barriers and costs for business which eats into profits. Then again consider what the UK GDP per capita would look like without the financial sector in London.
The other way to consider is that there are simply far less resources today than say 30 years ago, so less to harness and exploit = less GDP, and increasingly western countries are being propped up artificially by the finance sector taking more of a share of GDP. An interesting world we live in today, and it will be very interesting to see how the governments and banks of the world navigate the eventual AI bubble bursting granted such a significant portion of share market gains are now tied to this sector.
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