Unemployment set to hold at 5.3% as tough job market continues
Monday, 2 February 2026
Unemployment figures due out on Wednesday are expected to show the market remains tough for job-seekers, with most economists predicting they will show the official unemployment rate flatlined at 5.3% in the final three months of last year.
That would come in the wake of Stats NZ reporting a largely unexpected rise in inflation to 3.1% during the same quarter and amid mixed signals over the strength of the economic recovery.
ANZ nudged up its unemployment forecast to 5.3% last week, bringing it into line with the Reserve Bank’s November forecast, after previously predicting it would ease to 5.2%.
Senior economist Miles Workman said the bank still believed unemployment was “close to rounding the corner”, but warned progress might be masked by more people without jobs choosing to look for work and therefore being counted in the statistics.
“A higher unemployment rate than our forecast owing to higher participation wouldn’t necessarily indicate the labour market is on the wrong trajectory,” he said.
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BNZ, Kiwibank and Westpac have also been expecting the rate to come in at 5.3%.
Westpac senior economist Michael Gordon didn’t expect it to climb from there, but warned any future improvement could be gradual at first, “as employers look to make more use of their existing staff”.
ASB senior economist Mark Smith was more optimistic, predicting the rate would ease slightly to 5.2%. He noted that if that proved correct, it would represent the first quarterly fall in the official unemployment rate in four years.
The rise in annual inflation to 3.1% appears to have killed off any prospect of further rate cuts by the Reserve Bank and any sign of an earlier-than-expected recovery in the labour market could add to pressure for it to signal rate rises are on the cards this year.
Smith said that with the demand for labour stirring and spare capacity eroding, conditions were in place for a pick-up in wage inflation over the year.
Even as nervousness about inflation and rate rises increase, confidence in the economic recovery remains patchy, however.
Infometrics chief forecaster Gareth Kiernan said on Friday that the recovery was still looking “unconvincing” according to its latest forecasts.
A survey released by ANZ on Friday suggested consumer confidence was still on the rise in January. A net 29% of respondents expected to be better off this time next year, up 7 percentage points from December and the highest level since April 2021.
But Kiernan said households remained hesitant to embrace any potential upturn, especially given the “false start of a recovery in 2025”, with many people still unwilling to commit to major decisions.
“Consumers and many businesses are fatigued after three years of stop-start conditions. Although some indicators have improved, the overall momentum has been too patchy to fully restore confidence.”
More recent negative data includes figures from Stats NZ that suggest spending using bank cards fell 0.2% in the usually strong month of December and a slight softening in the proportion of businesses expecting better times ahead, reported in ANZ’s monthly survey of business confidence.
The Reserve Bank’s Nowcast forecasting tool is now predicting more pedestrian 1.2% GDP growth in the six months to the end of March, whereas at one point earlier this month it had been pointing to a much more spectacular 2.3% jump.
ANZ is forecasting Stats NZ will also report wage growth is easing off, tipping average hourly earnings in the private sector grew 3.2% last year, once overtime is excluded.
That would be sharply down from the 4.1% annual growth recorded in the September quarter and below the Reserve Bank’s estimate of 3.4% growth.