Jobless rate lowest since June 2009 but many part-timers underemployed.

Employment increased strongly over the last three months of 2013; wages, not so much.

The number of people employed rose by 24,000 or 1.1 per cent in the December quarter, Statistics New Zealand reported, enough to offset a migration-fuelled increase in the labour force and still reduce the unemployment rate to 6 per cent from 6.2 per cent in September.

It is the lowest unemployment rate since June 2009 when it was also 6 per cent.

The latest quarterly rise in employment came on top of a strong 1.2 per cent increase in the September quarter. The second half of last year accounted for more than three-quarters of 2013's rise in employment, which was 66,000 people or 3 per cent.


In Auckland the annual increase was 6.9 per cent and in Canterbury 5.9 per cent.

Over the course of the year the net inflow of migrants rose markedly, reflecting a weakening in the Australian labour market.

Together with an increase in the participation rate - the proportion of the working age population either employed or actively seeking work - that contributed to a 52,000 increase in the labour force.

The increase in employment mopped that up and reduced the ranks of the unemployed by 15,000 to 147,000 over the year.

Two-thirds of the December quarter's employment gain was in full-time employees.

But the 3 per cent annual rise in the headcount of employees was not matched by an increase in hours worked, which rose just 1.3 per over the year and fell 0.3 per cent in the December quarter.

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The household labour force survey found nearly one in four of the 521,000 part-timers were underemployed, that is, would prefer to work longer hours.

The construction industry posted the largest increase in employment last year - up 8.6 per cent or 14,700 people - while manufacturing, much of which produces inputs to the construction sector, added 14,400 jobs, an increase of 6 per cent.

"The $64,000 question is how much spare capacity there is in the labour market," ANZ economist Mark Smith said.

Average hours worked per worker fell back to the September 2012 trough of 33 hours, which implied a margin of slack from the existing workforce. But on the other hand the relatively high level of skilled labour shortages firms are reporting in business surveys suggested a degree of mismatch by sector and region between where skills are located and where they are needed, he said.

Meanwhile wages data also released by Statistics NZ yesterday remained subdued, even if up slightly from their lows.

The labour cost index recorded a rise of 0.6 per cent in the quarter in private sector ordinary time wage rates, up from 0.4 per cent in the September quarter.

"However this simply returned its annual pace to 1.7 per cent from 1.6 per cent which ... is a bit below the 2 per cent speed which would be consistent withe the Reserve Bank's CPI inflation objectives," said Bank of New Zealand economist Craig Ebert.