Modest job gains and soft wage growth help borrowers now, but banks warn on 2027 recovery and stagflation risk
New Zealand’s labour market is edging higher, offering some short‑term support for borrowing capacity and arrears management even as banks flag a tougher path ahead for mortgage holders.
Stats NZ’s latest employment indicators show seasonally adjusted filled jobs up 0.3% in March to 2.35 million, with total gross earnings rising 2.5% year‑on‑year to $16.7 billion.
In a Westpac analysis, senior economist Michael Gordon said the 0.3% rise in filled jobs was “providing more evidence that the New Zealand economy was regaining momentum before the Iran conflict”. While the monthly figures can be volatile, he said there has been “a modest uptrend emerging over the last six months”.
South Island, services steal the jobs spotlight
Stats NZ data show health care and social assistance, public administration and safety, and education and training adding the most jobs over the year, while manufacturing and construction each fell 1.5%. Regionally, Canterbury, Waikato, and Otago led the gains, with Northland and Wellington slipping.
Westpac also highlights ongoing strength in public‑sector roles and tourism‑linked industries such as transport and hospitality, while noting continued weakness in manufacturing, and only tentative stabilisation in construction and professional services.
Jobs in Canterbury, Otago, and Southland are now above their 2023–24 highs, supported by strong agricultural export prices, leaving the South Island looking more upbeat than the North.
Banks flag higher unemployment and “stagflation” risk
Beneath the headline stability, bank economists expect unemployment to drift higher as labour supply, driven by net migration and participation, outpaces hiring.
In its Labour Market Preview, Westpac is forecasting the March‑quarter jobless rate to hold at 5.4%, with wage growth running at about 2% annualised given “the existing slack in the labour market”.
ASB’s preview is slightly more cautious, tipping the unemployment rate to rise to 5.5% even as it estimates employment grew 0.1% in the quarter. Economist Wesley Tanuvasa describes it as “a potentially awkward set of numbers”, warning that “we do not envisage a labour market recovery until 2027”.
Both banks highlight the risk that higher near‑term unemployment and lingering inflation could create “stagflationary” conditions in 2026, complicating Reserve Bank decisions on the official cash rate.
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