Unemployment lowest since 1986 - falls to 3.2 per cent

The new record inflation figures come as no shock to many, with rising housing, fuel and construction costs putting the pinch on even those with means. Video / NZ Herald

Unemployment fell in the December quarter to 3.2 per cent, the lowest since modern records began in 1986.

It was down from a (revised) 3.3 per cent in the previous September quarter, StatsNZ said.

"This quarter's unemployment rate is now the lowest rate recorded since the HLFS series began in 1986," StatsNZ senior manager Becky Collett said.

"The labour market continued to show the tightness we saw in the September 2021 quarter, with both unemployment and underutilisation rates remaining low."

ASB senior economist Mark Smith said he expected the labour market to tighten even further over coming months.

Situations vacant: Low unemployment is putting pressure on the labour market.

That, in combination with rising wages and consumer price inflation, meant ASB had revised its interest rate outlook, picking the Official Cash Rate to peak at 2.75 per cent in early 2023 (up from 0.75 per cent now).

Average ordinary time hourly earnings rose 3.8 per cent in the year to the December 2021 quarter to reach $35.61.

Average weekly earnings per full-time equivalent (FTE) employee in the QES also rose, up 1.8 per cent over the quarter and 5.7 per cent over the year.

Wage inflation, as measured by the labour cost index (LCI) for all salary and wage rates, was 2.6 per cent in the year up to the December 2021 quarter.

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Overall employment grow slowed slightly. But there was strength in the younger end of the labour market, StatsNZ said.

In unadjusted numbers, 27,700 more people were in employment over the quarter, and 101,000 more employed people over the year.

Over the year to December 2021, the number of paid employees rose 3.7 per cent and within that, permanent employment increased 3.8 per cent.

"Some of the largest increases in employment over the year came from young people," Collett said.

"For instance, more 15 to 19-year-olds were employed in retail trade and accommodation and food services over the course of 2021."