Statistics New Zealand publishes labour market figures for the June quarter on Wednesday, and most bank economists expect them to show unemployment back at or above its highest level in more than a decade.
The rate sat at 5.3 percent in the March quarter, with 163,000 people out of work and actively looking, according to Stats NZ. That was a shade below the 5.4 percent recorded in the December 2025 quarter, which was itself the worst reading since 2015. Anything at 5.5 percent or higher on Wednesday would take the country past that mark and into territory not seen since the years immediately after the global financial crisis.
The forecasts are clustered tightly and they lean upwards. A survey of bank economists published by interest.co.nz has the Reserve Bank, BNZ and Westpac all picking 5.4 percent, while ANZ and ASB both expect 5.5 percent. Kiwibank is the outlier, tipping the rate to hold at 5.3 percent. Nobody is forecasting a meaningful improvement.
What makes this release unusual is not the number itself but the company it keeps. The Reserve Bank lifted the Official Cash Rate by 25 basis points to 2.50 percent on 8 July, the first increase since May 2023, and signalled that more increases were likely at coming meetings. Central banks do not normally tighten into a weakening job market. This one is doing it because the other half of its mandate has come unstuck.
Annual inflation reached 4.1 percent in the June quarter, up sharply from 3.1 percent in March and well clear of the Reserve Bank’s 1 to 3 percent target band. Almost a quarter of that annual increase came from petrol alone, which rose 27.5 percent over the year as the Middle East conflict worked its way through global fuel markets. Strip petrol and diesel out and the index would have risen 2.9 percent, comfortably inside the band. The Reserve Bank is therefore raising borrowing costs in response to a price shock that originated several thousand kilometres away, at the same moment domestic demand for labour is going backwards.
Economists surveyed by interest.co.nz described the quarter in fairly blunt terms. ANZ’s Miles Workman said firms would have “pressed the pause button” during the June quarter due to spiralling oil prices and heightened global uncertainty. BNZ’s Doug Steel said “higher oil prices and renewed upward pressure on domestic fuel prices have raised the risk of inflation staying close to 4%”. Kiwibank’s Alexandra Turcu said “the soft demand for labour, coupled with plenty of job seekers, will keep the lid on wage growth too”.
Westpac senior economist Michael Gordon, in the bank’s June quarter preview published on 29 July, put it more plainly. “The jobs market has held its ground through the Middle East conflict, but it hasn’t gathered the momentum that we would have otherwise hoped to see,” he said. Westpac expects employment growth to fall short of population growth again, which is the mechanism by which the unemployment rate keeps drifting up even when the number of jobs is not actually falling.
That mechanism is worth understanding, because it explains why the headline rate and the job numbers can tell different stories in the same week. Stats NZ’s employment indicators for June, released on 28 July, put filled jobs at 2.35 million, up about 14,300 or 0.6 percent on June 2025. Jobs are being added. They are simply not being added fast enough to absorb everyone arriving in the labour force, and when participation holds up while hiring slows, the unemployment rate rises regardless.
The wage figures released alongside the unemployment rate deserve more care than they usually get. The headline wage measure is the labour cost index, which was running at 2.0 percent annual growth in the March quarter. It is tempting to subtract that from 4.1 percent inflation and declare that wages fell 2 percent in real terms, and plenty of commentary will do exactly that on Wednesday. The comparison is not that clean. The labour cost index deliberately holds the quality of the job constant, so it measures what an employer pays for the same work rather than what any individual takes home. Someone promoted, or working more hours, or moving to a better paid employer does not show up in it. The broader earnings measures from the quarterly employment survey generally run higher for that reason. The index is a good guide to wage pressure in the economy and a poor guide to household living standards.
Even allowing for that, the direction is not in dispute. Pay is growing more slowly than prices, and the main reason prices are rising is a fuel bill that households cannot substitute their way out of quickly. That combination hits renters and lower income households first, because fuel and food take a larger share of their spending and they have the least room to absorb a shock without cutting something else.
There is a genuine counter argument to the gloom. Job advertising has been improving for most of the past year, with SEEK’s June report showing ad volumes up almost 11 percent on a year earlier. Consumer confidence lifted to a five month high in July. Export receipts have been strong. The labour market is a lagging indicator, and it is entirely possible Wednesday’s figures describe an economy that has already begun turning without the jobs data catching up yet.
The thing to watch on Wednesday is not the headline rate but the underutilisation rate, which was 12.9 percent in March. It captures people who are working fewer hours than they want and people who have stopped looking, and it tends to move before the unemployment rate does in both directions. If underutilisation is falling while unemployment ticks up, the recovery argument holds. If both are rising, the Reserve Bank will be lifting rates into a labour market that is still deteriorating, which is an uncomfortable place for anyone with a mortgage to reprice this year.
The figures are released at 10.45am on Wednesday 5 August.
What are you seeing in your own workplace or industry? Has hiring picked up where you are, or stalled? Let us know in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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