"Storm clouds hanging over the global economy" have helped push employment confidence down to a level not seen since June 2009, when New Zealand was only just emerging from recession, Westpac says.
And the bank says the fall in job sentiment, combined with reduced consumer confidence flagged in another survey released last month, means there is a risk of consumer spending taking a dive during the early part of this year.
That would be bad news for the retail sector, which is still struggling to get back on its feet following the global financial crisis.
The Westpac McDermott Miller Employment Confidence Index fell 4.6 points in the December quarter from 104.2 to 99.6 - its lowest level since June 2009.
"What's really driving [the fall in sentiment] is concerns about the broader economy, rather than what's happening to people on the ground," said Westpac senior economist Felix Delbruck. "What's really changed in the last three months has been much gloomier news from overseas."
The survey, which canvassed around 1500 respondents in the December quarter, summarises households' perceptions of the labour market and personal employment situations. An index number under 100 indicates more pessimists than optimists.
Delbruck said sentiment was "on a knife-edge" at the moment.
"It's at a historically low level and it's the worst it has been since mid-2009 when we were just heading out of the recession - it's not a great number."
Delbruck said he was not surprised by the result, as it had been foreshadowed in the Westpac McDermott Miller Consumer Confidence Index, which showed consumer sentiment had fallen to its lowest level since the depths of the recession during the three months to December last year.
Delbruck said a reduction in spending resulting from the lower sentiment shown in both surveys could exacerbate a post-Rugby World Cup spending lull. "It's one way in which global gloom is likely to affect the local economy," he said.
Westpac said the fall in employment confidence shown in the survey was almost entirely the result of a 7.5 per cent decline in expected employment conditions.
On balance, 9 per cent of respondents thought national job prospects would worsen over the coming year - a big turnaround from the cautious optimism they had shown previously, Westpac said.
The bank said respondents' perceptions around the existing employment situation, which had already been gloomy, deteriorated further.
"A net 62 per cent now think that jobs are currently hard to get nationwide, up from 53 per cent three months ago and roughly the same as in late 2010, when the economy last entered a soft patch," Westpac said.
The bank said a sense of vulnerability was emerging in low and middle income households, with a net 15 per cent of lower income respondents thinking their jobs would be less secure in 12 months' time.
Responses to questions about earnings were more positive, with increasing negativity about job availability offset by an improvement in reported earnings, Westpac said.
But the bank said the increase in earnings should not cause too much concern for the Reserve Bank, as that component of the index remained well below pre-recession levels.
"This gives the RBNZ room to sit tight as the global situation continues to unfold."
Regionally, employment confidence was in pessimistic territory in all areas of the country apart from Auckland, Canterbury and Southland, Westpac said.
* Has fallen to its lowest level since June 2009.
* On balance, 9 per cent of survey respondents think national job prospects will worsen during the coming year.
* 62 per cent now think jobs are currently hard to get nationwide.