Employment growth remained feeble over last year's final three months.

The number of people employed rose 3000 or 0.1 per cent, when the market had expected 0.4 per cent.

Over the whole of last year the economy added 35,000 jobs, a 1.6 per cent increase, but most of them - 25,000 - were back in the March quarter.

Since then employment growth has only just kept pace with growth in the working age population, leaving the employment rate steady at 63.9 per cent. That is still about 2 percentage points below the rate prevailing before the global financial crisis.


Full-time employment fell 13,000 in the December quarter.

"The shift back towards part-time workers is consistent with the high level of economic uncertainty that was experienced during the second half of 2011, with the European debt crisis convincing firms to only hire workers on a flexible basis," Infometrics economist Matt Nolan said.

Hours worked dropped 1.4 per cent in the quarter on a seasonally adjusted basis, to be 0.6 per cent lower than a year earlier.

ANZ economist Sharon Zollner said that with average hours well below historical norms, there was plenty of scope for firms to meet any increased demand by giving existing workers more hours rather than hiring more employees.

Despite the weak employment growth, the jobless rate fell to 6.3 per cent of the labour force from 6.6 per cent in September.

That reflected a steep rise - 11,000 or 1 per cent - in the number of people statistically classified as not in the labour force. They are people of working age (over 15) who are neither employed nor actively seeking work, which is a requirement of being counted as unemployed.

Male employment fell 4000. The unemployment rate for women at 6.3 per cent is now lower than the male unemployment rate of 6.4 per cent and the lowest it has been since June 2009.

However, the annual numbers have been blown around by quake-ravaged Canterbury, where employment has shrunk 8.3 per cent over the past year.


Outside Canterbury, employment growth was twice as strong as the national total, rising 3.3 per cent over the year, and the labour force participation rate rose from 68.1 to 68.8 per cent, instead of the 0.2 percentage point increase to 68.2 per cent recorded for the country as a whole.

Employment in Auckland is up 8 per cent on a year ago and its unemployment rate at a two-and-a-half-year low.

Nationally, jobs growth in the quarter was strongest in manufacturing (4.9 per cent), utilities (3 per cent) and retail trade and accommodation (3.2 per cent). Education sector jobs fell 2.9 per cent.

"Construction sector employment managed a 0.5 per cent quarterly increase, and we expect conditions in this sector to strengthen considerably over the next few years," Zollner said.

"With construction sector employment still around 9 per cent below its 2006 peak, the hope is that there will be sufficient capacity within the sector to enable the pick-up in construction activity to continue without quickly running into resource bottlenecks."

But the statistics on migration to Australia threatened that optimism, she added.

ANZ expects the labour market to pick up only modestly at best in the near term, but more strongly in the second half of the year as the Christchurch rebuild kicks in.

ASB economist Jane Turner said the Reserve Bank would discount the decline in the unemployment rate, as it was driven by an unusual move in participation, and focus on the weakness in employment growth.

"Over the past year, the recovery in the labour market has been barely enough to offset growth in the population, with the unemployment rate remaining reasonably elevated," she said.

Coupled with a subdued growth outlook, and the potential for delays to the Canterbury rebuild, the outlook for the labour market remained one of gradual recovery.

Proportion of disengaged youth creeps up

After improving in the preceding six months, the proportion of 15- to 24-year-olds not in employment, education or training rose again in the December quarter to 13.1 per cent.

The numbers of young people disengaged from both work and education are of interest because of the "implications it may have for their future labour market experiences", Statistics New Zealand said.

This indicator, which it has only just started publishing, is derived from the household labour force survey, source of the official employment data.

The NEET rate has ranged between 12.4 per cent and 14.4 per cent over the past two years. Between 2004 and 2008 it ranged between 10.2 and 12 per cent before climbing to a peak of 15.4 per cent in December 2009.

Across OECD countries the average rate is 12.2 per cent. New Zealand's rate falls between Australia's 11.4 per cent and rates of 13.4 per cent in Britain.