Yesterday's increase in the unemployment rate to a two-year high was a "technical rise" largely caused by the post-earthquake situation in Christchurch, Prime Minister John Key says.

But Employment Minister Steven Joyce said the deterioration in the job market underlined the need for increased oil and gas exploration, more foreign investment and the SkyCity convention centre deal.

Contrary to economists' expectations, the unemployment rate rose by 0.1 per cent to 6.8 per cent in the three months to June, according to official data yesterday. It had been expected to fall to 6.5 per cent.

"It's a very small, technical rise," Mr Key said. "I'm not overly concerned, but we were hoping that number would fall slightly. From what we can see, employment is rising in all parts of the country [except] Christchurch. So the Christchurch numbers are dragging it down a little bit."


Mr Key said the Government was comfortable with the data.

"In terms of the unemployment benefit numbers, we're seeing those continue to fall."

Mr Joyce said the data showed it was "important we allow businesses the opportunity to grow and create jobs".

"This includes the intensification of agriculture, the development of aquaculture, greater foreign investment, encouraging hi-tech industries, expanding oil and gas exploration, and progressing an international convention centre in Auckland."

Labour's finance spokesman David Parker said the loss of 2000 jobs in the quarter showed National's management of the economy wasn't working.

"Under National, unemployment has grown by 57,000 people," he said.

Mr Parker said a Labour Government would address the fundamental problems facing the economy by tackling the strength of the New Zealand dollar and through pro-growth tax reform such as a capital gains tax and research and development support.



Kippy Patalani, his wife and two sons know better than anyone how tough the job market is - they have all been made redundant.

And Mr Patalani knows he's not the only one in that position.

"I've spoken to a lot of people who are like me and my family," he said.

The latest Household Labour Force Survey shows the number of people employed decreased by 2000 between the March and June quarters while the unemployment rate rose to 6.8 per cent (up 0.1 per cent).

Mr Patalani can sympathise with people thrust back onto the labour market after losing their jobs.

He, his wife, Manita, and sons William, 25, and Louihie, 24, all lost their jobs, along with 81 others, at Norman Ellison Carpets after owner Cavalier announced it was closing its spinning plant in Onehunga last month.


"It was just out of the blue. It was pretty sad," Mr Patalani said.

"I've been looking for work and been trying to set up job interviews but I haven't heard anything for three weeks. It's gone cold at the moment, it was hot but it's gone cold now."

He has been forced to pick up part-time work as a cleaner to make ends meet - he works 18 hours a week for $13.70 an hour, just above the minimum wage of $13.50.

His family are planning to rent out their Mangere home next week to take a break from the pressure of the mortgage. "I need a job... that's full-time and that I can pay the bills with."