Unemployment in Rotorua rose in the last three months of 2012, new figures reveal.
Stats NZ figures showed the city's unemployment rate climbed to 11.1 per cent in the December quarter, 2.3 per cent higher than the previous three-month period.
The employment rate - the percentage of people employed in the working-age population - also fell slightly to 56.2 per cent.
Stats NZ said the Rotorua figures were estimates and should be treated as "indicative", because of the small sample size.
Rotorua's First Union spokesman Rawiri Daniels said tough economic conditions had severely limited growth in local industries and cut into job opportunities.
"We're finding many businesses are struggling. Not only is there a lack of new jobs being created, but retention of existing staff is a problem.
"There are a lot of people who would jump at the opportunity to do more hours, but unfortunately they are not on offer right now from businesses."
Work-force casualisation was another major issue, he said.
"In forestry, there's not a lot of extra jobs about, no growth going on.
"Labour hire companies are often being asked to fill gaps in workplaces where permanent employment should prevail ahead of contract labour," he said.
Nationally, the unemployment rate dropped to 6.9 per cent in the three months to December. That was down from a 13-year high of 7.3 per cent in the September quarter, according to the Stats NZ household labour force survey.
However, the number of working-age people in employment has also fallen with 23,000 fewer Kiwis in jobs.
"We're seeing fewer people working and looking for work and more people outside the labour force," Diane Ramsay of Stats NZ said.
"More younger people are solely in study and more older people are entering retirement."
The employment rate fell 0.8 per cent for the December quarter, to 62.6 per cent. A breakdown showed the fall was thanks to a 6 per cent decline in part-time employment. Full-time employment rose slightly (0.4 per cent).
Westpac economists called the survey an "oddball assessment" of the labour market.
"Our assessment of the labour market has not really changed - it is still weak, but we do not believe that it has suddenly gotten sharply better or worse."
Year-on-year figures showed the total number of Kiwi jobs fell 1.4 per cent in the 12 months to December. This was led by a 19 per cent plunge in self-employment, which has been falling from a peak in December 2011.
Otago had the lowest unemployment rate across the regions at 4.3 per cent, with Southland at 4.6 per cent and Canterbury at 4.9 per cent. Auckland's unemployment rate improved to 7.2 per cent, while Wellington's rose to 7.9 per cent.
Northland had the highest unemployment rate at 9.5 per cent.
Labour's finance spokesman David Parker said workers in the manufacturing sector had struggled in the past year.
"[It] was a bad year for workers in the manufacturing sector. There were 17,200 fewer people in jobs at the end of it with the number falling every quarter."
Tertiary Education, Skills and Employment Minister Steven Joyce said the survey reflected the "on-going impact of tough economic times globally".
New Zealand's unemployment rate is now the 14th lowest among developed nations, below Canada's 7.2 per cent and above Israel's 6.7 per cent.
- additional reporting Jamie Gray, Business Desk
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