The official unemployment rate has risen to 4.2 per cent for the first quarter of the year, from 4 per cent in the December quarter.

That's not quite as bad as economist expectations although the data collection largely pre-dates the lockdown and the number is expected to rise sharply to between 8 and 10 per cent by the end of the year.

The latest numbers showed the economy had been in strong shape heading into the Covid-19 lockdown, Stats NZ said.

"Our surveys captured a robust labour market before New Zealand went into Covid-19 lockdown. The unemployment rate has remained stable at around 4 per cent since late 2018, after trending down since late 2012," labour market and household statistics senior manager Sean Broughton said.


"The impact of Covid-19 on the labour market, including unemployment, hours actually worked, and underemployment, should be clearer in the June quarter," Broughton said.

"There was a sharp rise in the number of people receiving Jobseeker benefit support at the end of March and start of April, though this is not the same as the official measure of unemployment."

The data also showed wages on the rise - at an annual rate of 3.6 per cent, with average ordinary time hourly earnings up to $33.14. This was well above inflation at 2.5 per cent.

This increase continued to reflect the impact of collective agreements signed by nurses, police, teachers, and principals in 2019.

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ANZ economists had been picking the Labour Market Data to show unemployment rose 4.6 per cent in the quarter with the full brunt of the lockdown still to come.

"Although these data paint a positive picture, the reality is that lives and
livelihoods are being significantly affected by the Covid-19 crisis, and the labour
market is deteriorating," said senior economist Liz Kendall.

"Firms have been able to use wage subsidies, cash reserves and loans to delay lay-offs,
but for some this will not be sustainable," she said.


"Once we went into lockdown, the economic impact of the crisis intensified quickly. The
increase in unemployment that we expect occurred in Q1 will be dwarfed by increases as
we head into the middle of the year".

"Our forecast is for unemployment to increase from 4 per cent at the end of last year to 8 per cent in Q2 and peak at 11 per cent in Q3."

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The rise of the service sector as the main source of new employment in the past two decades has made economies throughout the Asia-Pacific vulnerable to large-scale job losses in the pandemic, S&P Global said in a recent report.

Looking at unemployment in the region, S&P Global says small and medium enterprises (SMEs) have created many of these new service sector jobs.

"Firms with fewer than 250 employees account for almost 70 per cent of all jobs in Australia, Japan, Korea and New Zealand," the report said.

SMEs usually had fewer resources to draw on to weather a sudden economic stop.

Access to finance is a perennial challenge for smaller firms and is likely to worsen.

"As revenues collapse, to stay alive these firms will be forced to cut whatever expenses they can. In many cases, their largest expense will be the wage bill." The Government's official Covid-19 advisory website