Unemployment data: Why economists fear stagflation risk for NZ jobs – The Front Page

New Zealand’s unemployment rate is expected to hold steady, at least on paper, when new data is released this week.

But beneath that headline number, economists are warning the labour market may already be weakening, just as global tensions and an oil shock begin to bite.

There are also growing concerns about something called “stagflation” – where higher unemployment and rising inflation collide – and what that could mean for households and the wider economy.

Labour market data for the first quarter is due from Stats NZ on Wednesday.

NZ Herald business editor at large Liam Dann told The Front Page that Stat NZ’s labour market data is broader than just the headline unemployment rate.

“We’ll get lots of other bits and pieces there that will build a complete picture of what’s happening in the labour market.

“You get some stuff like the underutilisation rate, so, people who have some work but would like some more,” he said.

Economists seem split between the unemployment rate being 5.4% and 5.5%, but Dann said the exact percentage is not hugely meaningful on its own.

“Another thing that will be in this data is job creation or employment growth. So, how many more people are employed as opposed to how many are unemployed?

“I think economists do expect to see some employment growth, but they also feel that we will see the total labour market will have grown, whether that’s a slight uptick in immigration just because Kiwis aren’t leaving quite in the same numbers that they were, or a few more people coming back into the job market,” he said.

Even people in full-time work should pay attention to unemployment data, Dann said, because it signals whether the labour market is weakening or strengthening.

Rising unemployment can mean lay-offs, weaker job security and less spending in the economy. Wage data also shapes pay rises and inflation pressure.

ASB’s Wesley Tanuvasa has said it “would not take much” to push the unemployment rate in either direction, with “both upside and downside risks”.

“We do not envisage a labour market recovery unfolding until 2027 and cite heightened stagflationary risks over 2026 given higher near-term unemployment and higher near-term inflation in our projections.”

Stagflation is a mix of high inflation, low GDP growth and rising unemployment.

“It’s the worst thing really that can happen to an economy,” Dann said. “It creates a real dilemma for the central bank because interest rates are used to keep inflation down, but they tend to suppress the economy further.

“So, do they put the rates up to deal with the inflation and risk really slamming the economy more, which would mean more unemployment? At the moment, there’s a lot of wait and see and trying to do the balance,” he said.

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