Jobless rate rises to 5.7% while wage growth trails inflation
New Zealand’s unemployment rate rose to 5.7% in the September quarter as employment unexpectedly fell and wage growth stayed well behind inflation, according to new Stats NZ figures. That’s the highest since 2015.
The result came in above the 5.5% expected by the market and the Reserve Bank of New Zealand (RBNZ). For advisers, that means tighter household budgets and growing disagreement over where mortgage rates are heading.
Slack builds across the labour market
Employment fell 0.1% over the quarter, and the participation rate dropped to 70.4%. The number of unemployed people reached 174,000, the highest since 1993, according to ASB’s labour market review. Full-time employment fell 0.8%, while part-time work rose 2.5%.
Hours worked fell 1.6%, which ASB linked to higher costs from the Middle East shock. Westpac’s analysis offered another explanation, saying the Matariki holiday, which seasonal adjustment doesn’t capture, likely affected the drop. Westpac senior economist Michael Gordon said that despite noise in the survey, “the message on the jobs market remains weak”.
Beneath the headline rate, Kiwibank highlighted a longer-term concern. In its latest economic commentary, it said 21.5% of unemployed people have been out of work for more than a year, the highest share since 1995. Young people were also hard hit, with 14.1% of those aged 15 to 24 not in employment, education, or training.
“We can’t guarantee that this is the peak in unemployment,” Kiwibank’s economists wrote.
Wages trail inflation, squeezing budgets
Annual labour cost growth sat at about 2%, the lowest in more than five years, compared with consumer price inflation of 3.7%. Only about 26% of jobs received a pay rise of more than 3%, ASB said.
That gap matters for borrowers. Sluggish wage growth limits borrowing capacity and makes it harder for existing borrowers to handle higher repayments.
Economists split on the OCR
The data has sharpened disagreement over the rate outlook. ASB senior economist Mark Smith still expects 25 basis point hikes to a 3.5% OCR peak by March 2027, though he said the risks lean towards slower tightening.
“The labour market is not the cause of high inflation at present,” Smith wrote.
The New Zealand Institute of Economic Research (NZIER) expects only one more increase, in late 2027. Kiwibank argued that further rate hikes aren’t needed while the labour market keeps a lid on price growth. Westpac said the softer data would encourage the doves on the RBNZ’s Monetary Policy Committee ahead of its 9 December decision.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
