The unemployment rate has fallen more sharply than expected, to 3.9 per cent in the September 2018 quarter, Stats NZ says.

That's down from 4.4 per cent last quarter - and is the lowest unemployment rate since the start of the global financial crisis - the June 2008 quarter, when it was 3.8 per cent.

The fall in the unemployment rate in the latest quarter reflects a fall in the number of unemployed people (down 13,000) and a strong rise in employment (up 29,000).

This quarter's employment rate rose to 68.3 per cent, the highest rate since the series began more than 30 years ago.


However, despite the strong numbers wage growth has remained subdued.

In the latest quarter, 109,000 people were unemployed – 13,000 (10.5 per cent) fewer than in the June 2018 quarter, with 8000 fewer women and 5000 fewer men. For both sexes, this mainly reflected 11,000 fewer unemployed youth (15–24-year-olds).

There were 6000 fewer youth unemployed and not in education, which led to the not in employment, education or training (NEET) rate falling to 10.1 per cent.

The fall in NEET youth was primarily influenced by men and women aged 20–24 years.

"While this quarter's unemployment rate is outside market expectations, we know New Zealand has a small economy with a dynamic labour market and large changes, both up and down, have happened before," labour market and household statistics senior manager Jason Attewell said.

But while employment growth was strong - wage growth has remained relatively subdued.

ASB chief economist Nick Tuffley described wage growth as "modest".

"Supported by the second round of the $2bn healthcare worker settlement, private sector wages from the Labour Cost Index rose 0.5 per cent in the quarter, he said.


"Annual private sector wage inflation eased from six-year highs to 1.9 per cent. Wage inflation from the public sector was a more tepid 0.4 per cent."

Finance Minister Grant Robertson said the unemployment figure was "another real example of New Zealand's strong economic fundamentals."

"Our economic plan backs businesses to invest and hire," he said

He added that the Government had a strong focus on regional development through the Provincial Growth Fund.

"On top of this, our $1 billion investment to support business research & development, the $100 million Green Investment Fund, and Trade for All agenda will see investment in new technologies, and open up new markets for our exporters."

National's Finance Spokeswoman Amy Adams said the unemployment numbers were welcome news, but highlight growing pressures in an economy where business are struggling to find workers.

She said the low unemployment rate raised questions as to why the Government is putting through legislation to overhaul employment law.

"Today's numbers confirm what businesses have been saying for some time about labour market constraints are real and present a significant risk to future economic growth."

Employment Minister Willie Jackson said the drop in the unemployment rate means "better lives for thousands of New Zealanders."

"There are now over 2.66 million New Zealanders in employment which means that 29,000 more people and families are engaged in earning since the last quarterly results were released."

He said the Government is committed to making New Zealand the best place in the world to raise a child and this, in my view, starts with ensuring that real work, and real incomes are available for all New Zealanders.

"Today's survey release shows we are absolutely on the right track", says Jackson.

These regions had significant employment growth:

Auckland – up 34,600 (3.8 per cent)
Waikato – up 8400 (3.3 per cent)
Otago – up 6700 (5.5 per cent)
Gisborne/Hawke's Bay – up 6400 (6.5 per cent)
Taranaki – up 4300 (7.1 per cent).