New Zealand’s unemployment rate rose to 5.4 percent in the December 2025 quarter, reaching its highest level in nine years as increased labour force participation outpaced employment growth.
Infometrics reported that the unemployment rate lifted from 5.3 percent in the September quarter, while the participation rate edged up from 70.3 percent to 70.5 percent. Market expectations had been for both figures to remain steady, making the shift notable despite relatively modest movement.
Employment increased by 0.5 percent during the quarter, but the labour force expanded more rapidly as more people actively sought work. There were 14,000 additional people in the working age population and 19,000 more in the labour force. Of those entering the labour market, 15,000 secured employment while 5,000 were still seeking work.
Infometrics noted that although the rise in unemployment may suggest deterioration, several underlying indicators point to improving engagement with the workforce, with more people either working or available for work rather than remaining on the sidelines.
The underutilisation rate, which captures those unemployed, underemployed, or in the potential labour force, remained at 13.0 percent. However, there was significant movement within the category, including more individuals transitioning from the potential labour force into formal unemployment and a growing number seeking additional hours.
Underemployment reached a record 5.2 percent in the December quarter, highlighting ongoing challenges for workers attempting to secure either sufficient hours or stable roles. This outcome aligns with the Ministry of Business, Innovation and Employment’s Job Ad index, which recorded limited growth in job advertisements over the same period.
The composition of employment growth also raised questions about employer confidence. Part-time roles accounted for 55 percent of the 14,000 increase in employed people, an unusually large share given that part-time positions make up only about 20 percent of total jobs. This pattern suggests businesses may be approaching hiring cautiously, favouring flexibility over long-term commitments.
Weekly paid hours fell 0.1 percent compared with a year earlier, reinforcing the view that economic activity remains uneven and that workloads are constrained even among those already employed.
Labour cost growth continued to moderate, with the Labour Cost Index rising 2.0 percent annually in the December 2025 quarter, down from 2.9 percent a year earlier and marking the slowest increase since early 2021. Public sector wages grew slightly faster at 2.2 percent annually, compared with 2.0 percent in the private sector.
Despite the increase in unemployment, Infometrics reported that New Zealand remains mid-range among OECD countries, ranked 18th out of 38. Australia’s lower unemployment rate of 4.3 percent continues to be a factor influencing New Zealand’s currently weak net migration.
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