Filled jobs rose in July, but labour market slack set to persist into 2027
Advisers assessing clients' borrowing capacity in the months ahead should expect only gradual improvement in New Zealand's labour market, with ASB economists warning the employment recovery will be slow-moving even as the latest jobs data ticks higher.
The data: a gradual improvement, not a turnaround
Stats NZ figures show seasonally adjusted filled jobs rose 0.3% month-on-month in July, up 7,746 jobs to 2.36 million, with annual growth firming to 0.8%.
ASB's economics team described the result as encouraging but modest.
"Today's numbers were welcome, but incremental," the bank said in its Economic Note. "We suspect the employment recovery to be a bit like turning a tanker, and do not expect to see a meaningful reduction in labour market slack until 2027."
Sectoral divergence, a persistent theme through the downturn, is starting to narrow.
Annual goods-sector hiring turned positive for the first time since early 2024, rising 0.4% year-on-year, while the services sector — which accounts for more than 75% of the country's jobs — posted its strongest annual growth since May 2024 at 0.9%, though ASB noted these gains were concentrated in healthcare and public administration rather than spread broadly.
Primary sector employment remained the standout performer at 1.6% annual growth, supported by resilient demand for New Zealand commodities including dairy, kiwifruit, and meat despite a volatile global trade environment.
What it means for borrowing capacity
Regional and generational gaps in the labour market remain wide, a factor likely to shape lending conditions unevenly across the country.
Canterbury was the standout regional performer, with annual jobs growth advancing to 2.1%, while Auckland and Wellington posted more modest annual gains of 0.6% and 0.1% respectively. ASB said this pattern is consistent with its view that regions more exposed to export-driven sectors have fared better through the downturn.
Younger workers continue to bear the brunt of ongoing softness, with the 15-24 age bracket lagging well behind older cohorts in employment growth — a trend ASB expects to persist until hiring conditions firm more broadly, with flow-on implications for that cohort's borrowing capacity and market entry as first-home buyers.
Outlook hinges on lingering shocks
ASB said it still views the recovery as delayed rather than derailed by the earlier Middle East conflict, but flagged that top-down indicators — including elevated underutilisation and easier labour sourcing — point to labour market slack persisting for some time yet.
"We still see the recovery as delayed, not derailed, by the Middle East shock," the bank said, adding that wage growth is likely to stay contained given the current balance between labour supply and demand.
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