The unemployment rate has jumped to 7.3 per cent, the highest in 10 years, but this time it reflects a lot more people looking for work rather than a lot fewer jobs.

It is up sharply from 6.5 per cent in September.

The economy needed to create about 10,000 more jobs in the past three months of 2009 just to keep pace with a growing population of working-age people, in part the result of fewer moving to Australia. The supply of workers has also been boosted by people previously outside the labour force joining the ranks of job seekers.

Employment fell by 2000. That is better than the 17,000 jobs lost in the September quarter or the 24,000 lost in the March quarter, and some economists believe it will be the last quarter in which employment falls.

But if the number of job seekers continues to outpace the growth in jobs the unemployment rate has yet to peak, especially as firms are expected to increase workers' hours before they take on more staff.

The number of unemployed rose 18,000 to 168,000, the highest since 1993.

The jobless - a broader measure which includes those available to work but not actively seeking work, which is a requirement if someone is to count as officially unemployed - rose 23,000 to 276,000.

The rise in unemployment has been especially large among the young. Those under 25 made up 24,000 of the 60,000 increase in unemployed over the course of 2009.

It is much higher among Maori (15.4 per cent) and Pacific peoples (14 per cent) than among Europeans (4.6 per cent). "The headline figures make the employment situation look worse than it is," said ASB economist Chris Tennent-Brown.

"Unemployment is rising because there are more people looking for work than there were previously, and more than expected at this stage of the economic recovery. In contrast, much of the preceding increases in unemployment came through the shedding of jobs."

Prime Minister John Key said this was not a time for despair.

Unemployment was always a lagging indicator, he said. That means it is slow to reflect downturns and upturns in the economy. "The reality is the international economy has been weak and New Zealanders are concerned about their jobs so they are spending a little bit less. Hopefully we are getting somewhere near the top [for unemployment] now."

The number of people on the unemployment benefit had fallen for two weeks in a row, Mr Key said, and the Youth Ops programme was highly successful with about 4600 now on the scheme.

Labour leader Phil Goff said the rise in unemployment was a shocking indictment of Mr Key's failure to look after families. "Only a year ago he announced a Jobs Summit which has been exposed as exactly what he said it wouldn't be, a talkfest.

"Meanwhile in Australia, which was serious about stimulating the economy to get through the downturn, unemployment is going down."

Australia's unemployment rate is 5.5 per cent. Unemployment in Auckland recorded a steep rise to 8 per cent from 6.5 per cent in September. Even giving the region maximum benefit of the margin of error, the increase would still have been to 7.1 per cent. By contrast the dairying regions, Waikato, Taranaki and Southland, were all well below the national average.

Over the past year job losses have been greatest in manufacturing, real estate and transport.

SLOWING DECLINE

Jobs lost 2009

* March quarter - 24,000
* September quarter - 17,000
* December quarter - 2000