Unemployment remains unchanged at 5.1%

Unemployment remained unchanged at 5.1% in the March quarter, Stats NZ said today.

That was better than expected, with economists largely picking unemployment to land at 5.3%.

Westpac senior economist Michael Gordon said the New Zealand labour market remains subdued, though not quite as soft as they were expecting.

“We’ve seen a marked drop in youth participation in particular in recent quarters, with the tougher jobs market seeing young people returning to or spending longer in study rather than actively looking for work.”

ASB senior economist Mark Smith said they expected the labour market will remain soft for much of 2025.

“Firms are likely to remain somewhat hesitant to take on new staff given the unsettled and uncertain economic outlook.

“The peak unemployment rate – in the low 5s – is expected to be historically low and is expected to start to edge lower towards the end of the year.”

The seasonally adjusted number of unemployed people in the March quarter remained 156,000, Stats NZ said.

Meanwhile, the seasonally adjusted underutilisation rate – a measure of spare capacity in New Zealand’s labour market – was 12.3%, or 390,000 people, compared with 12.1% in the December 2024 quarter.

The underutilisation figure includes those looking for work (unemployed), those working but seeking more hours of work (underemployed), and those not seeking work but would take a job if offered (potential labour force).

There were 45,000 fewer people working full-time in the March quarter, when compared with the same period a year ago. Part-time employment increased by 25,000.

Wage growth, measured by the labour cost index (LCI), increased 2.9% in the year to the March 2025 quarter.

Public sector wages increased 4.2% over the year, while private sector wages rose 2.6%.

Wages outpaced inflation, which came in at 2.5% for the 12 months to March quarter.

For the March quarter, LCI rose by 0.4% for the private sector, lower than the Reserve Bank’s expectation of 0.6%.

The public sector LCI rose by 0.9% for the quarter, led by a collective pay agreement for teachers.

Finance Minister Nicola Willis called the result “encouraging” but emphasised the need for “strong fiscal management and economic growth”.

“I know people are still struggling in this economy, that’s why on May 22 the Government will deliver a Budget that continues the work to get the books back in order, while building on the foundations we’ve laid to foster economic growth. It will be a responsible Budget that secures New Zealand’s future,” Willis said.

Both Westpac and ANZ economists had last week picked the unemployment rate would land at 5.3%.

“This would take it beyond its lockdown-era peak, and up to its highest level since 2016,” said Westpac senior economist Michael Gordon.

“We’ve come a long way from the post-Covid period of an overheated economy and severe labour shortages, when the unemployment rate reached a record low of 3.2%.”

ASB had picked an unemployment rate of 5.2%, in line with the Reserve Bank’s most recent forecast.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.