Unemployment rises to 5.4%, but there are some silver-linings
Wednesday, 4 February 2026
The proportion of Kiwis who are officially unemployed inched up to 5.4% in the final quarter of last year, when there were an additional 5000 people jobless but looking for work, Stats NZ has reported.
However, the major cause was more people seeking to rejoin the workforce, with the proportion of people in work also rising modestly.
The increase in the unemployment rate, from 5.3% in the September quarter, was not forecast by most economists and follows Stats NZ’s also-unexpected announcement last month that inflation in the final three months of last year had risen to 3.1%.
Stats NZ macroeconomic spokesperson Jason Attewell noted the official unemployment rate now was “the highest since the September 2015 quarter”.
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The twin disappointments in the headline unemployment and inflation figures could create a dilemma for the Reserve Bank, if it concludes that the recovery is weaker or taking longer than expected but that inflationary pressures are already showing through more strongly.
The central bank will next meet to review the 2.25% Official Cash Rate in a fortnight.
Stats NZ’s broader measure of underemployment in the economy was roughly flat, with the proportion of people out of work, or employed but seeking more paid hours, holding steady at about 13%.
The figures mean those seeking work face more competition, from 165,000 fellow job-hunters, in finding work.
But the fact the increase in official unemployment was linked to a rise in the proportion of people available for work, which rose to 70.5% from 70.3% the previous quarter, is a silver-lining.
The proportion of people in work increased to 66.7%, up by 0.1 of a percentage point from the previous quarter.
Another silver-lining— at least for people concerned by the prospect of rising interest rates — is that Stats NZ’s data showed pay rises were continuing to moderate roughly in line with the Reserve Bank’s expectations.
Average hourly earnings rose 3.4% to $44.08 in the year to the December quarter, which represented a decrease from the 3.9% annual rise recorded the previous quarter.
ANZ senior economist Miles Workman said the figures “were not great, but better than they looked” and didn’t paint a bad picture about activity in the labour market.
“There's still evidence under the hood here that things are recovering.”
The increase in the labour participation rate suggested people were “looking out the window, seeing more opportunities in the economy, and they're deciding to go and look for work”, he said.
Capital Economics economist Abhijit Surya said the indications were that the labour market would tighten very gradually and the Reserve Bank could continue to conclude that spare capacity in the economy would be slow to dissipate.