Auckland, New Zealand – New Zealand’s unemployment rate has risen to its highest level in more than a decade, reaching 5.4 percent, but economists are offering a cautiously optimistic outlook, suggesting the increase may signal a strengthening economy as more individuals re-enter the workforce. The latest figures from Stats NZ reveal a total of 165,000 people are currently unemployed, a rise of 4,000 from the previous quarter and 10,000 year-on-year.
The rise in unemployment, while higher than anticipated, is complicated by a concurrent increase in the number of people actively seeking employment. This dynamic has led some experts to believe the current situation could be an early indicator of economic resilience, rather than a sign of impending downturn. The discussion unfolded at a business breakfast in Auckland this week, where a sense of “cautious optimism” prevailed despite the concerning figures.
Job Market Nuances and Economic Outlook
Westpac chief economist Kelly Eckhold, speaking at the breakfast, emphasized the complex nature of the current economic landscape. He noted that New Zealand has experienced periods of fluctuating economic performance in recent years, with initial gains often followed by mid-year slowdowns. Eckhold cautioned that while there are reasons for optimism in 2026, the possibility of a similar pattern remains, particularly given it is an election year. Radio New Zealand provides ongoing coverage of New Zealand’s economic developments.
Eckhold explained that the increase in unemployment is coupled with a rise in the number of New Zealanders actively looking for work. “They survey New Zealanders to endeavor to ascertain how many of us are actually looking for work, because not all of us are for various reasons,” he said. “And the surprise last time was that jobs grew, but actually the number of New Zealanders thinking they wanted to be in the workforce grew as well.” He posited that this could be “early evidence of economic strength,” as people are more likely to seek employment when they perceive opportunities are available.
Hiring remains robust in sectors linked to government services, such as health and police, while the construction industry is currently facing challenges. Yet, Eckhold noted that lower interest rates are beginning to have a positive effect, although it is still early days to assess the full impact.
Peak Unemployment and Hiring Trends
Eckhold believes the unemployment rate has likely peaked and anticipates a modest decrease in the next quarter. This sentiment is echoed by Shay Peters, CEO of the Australia and New Zealand umbrella of Robert Walters, a recruitment firm. Peters, who hosted the business breakfast, forecasts a decline in the unemployment rate over the next 12 months. He pointed to a recent survey conducted by Robert Walters, revealing that 76 percent of businesses are planning to hire this year, an increase from 66 percent the previous year. RNZ National provides regular updates on the New Zealand labor market.
Despite the positive hiring intentions, Peters highlighted a concerning trend: the ongoing “brain drain” to Australia. “That is probably my biggest concern, around the level of individual that’s gone to Australia… they are the productive ones,” he stated. He observed that skilled workers are relocating to Australia with their families, purchasing homes, and contributing to the Australian economy, making their return to New Zealand unlikely.
The Role of AI in the Job Market
The impact of artificial intelligence (AI) on the New Zealand job market was also discussed. While there is some apprehension about AI potentially displacing workers, Peters noted that a widespread job loss due to AI has not yet materialized. However, he observed that AI is already being utilized by job seekers, with some clients receiving identical cover letters generated by AI bots. He emphasized the importance of “authenticity” in job applications, stating that it is a key differentiator in a competitive market.
The discussion also touched on the challenges of attracting skilled talent from overseas. Peters expressed uncertainty about New Zealand’s ability to import talent, given the global competition for skilled workers.
You can listen to the full discussion on The Detail podcast.
Looking Ahead
The New Zealand job market presents a complex picture, with rising unemployment figures tempered by cautious optimism and potential economic strength. The coming months will be crucial in determining whether the current trends will continue and whether the anticipated decline in unemployment will materialize. Monitoring the impact of lower interest rates, the ongoing brain drain to Australia, and the evolving role of AI will be key to understanding the future of employment in New Zealand.
What are your thoughts on the current state of the New Zealand job market? Share your insights in the comments below.
