Unemployment inches down but shock from fuel crunch yet to be felt

Wednesday, 6 May 2026

The official unemployment rate edged down to 5.3% during the three months to the end of March, Stats NZ has reported.

The fall from 5.4% the previous quarter had not been expected by bank economists who had predicted the rate to flatline or inch up.

But the small fall of 2000 in the number of people unemployed to 163,000 was explained by a drop in the proportion of those available and looking for work.

The number of Kiwis who were not counted as being in the labour force rose by 9000 to a little under 1.3 million, with the labour force participation rate dropping unexpectedly to 70.4%, from 70.5% previously.

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The “underutilisation” rate, which is a broader measure of underemployment in the economy and records, for example, part-time workers unable to find full-time work remained static at 12.9%.

An unwelcome development was that the proportion of people aged between 15 and 24 who were not in employment, training or education jumped to 14.4%, from 13.3% in the December quarter.

Young women remained less likely to be in employment, education or training than young men, Stats NZ spokesperson Abby Johnston said, commenting on the so-called Neet rate.

“Women aged 20 to 24 continue to have the highest Neet rate, rising 1.9 percentage points to 20.3% in the March quarter,” she said.

Infometrics principal economist Brad Olsen said the labour-market update was too soon to reflect any meaningful impact from the Middle East crisis.

Johnston said most of the data was collected before the conflict with Iran began on February 28.

The Treasury has forecast unemployment is most likely to remain at 5.3% in the current quarter if the price of oil averages around US$110 a barrel, which is about its current level.

But business surveys suggest more companies are preparing to shed staff.

ANZ reported last week that a net 2.7% of firms it surveyed in April expected to reduce the size of their workforces in the coming year as they ran into what the bank described as “a wall of worry”.

That marked the first time that metric had fallen into negative territory since mid-2024.

One possible positive for borrowers in the latest labour-market statistics is that average hourly earnings in the private sector, excluding overtime, rose by 3.5% during the quarter, over the same period last year.

The increase was unchanged on the December quarter and in line with the Reserve Bank’s forecast, but lower than the 4% rise ANZ had tipped, suggesting the 3.1% inflation rate was not feeding through strongly into high pay rises.

ANZ senior economist Miles Workman said Stats NZ’s figures did show the labour market had had some recovery but that pre-dated the oil shock.

“The unfortunate thing is there is not a lot of signal here in terms of labour market momentum going forward.

“Given there’s not a lot of surprise in the data versus the Reserve Bank’s forecast, there’s no major implications for monetary policy either.”