Misery Index has improved, so why do people feel so grim about the economy and jobs market?
Tuesday, 28 July 2026
ANALYSIS: People are feeling the worst about their employment prospects in two decades, despite headline unemployment having been far worse.
And the reason for the disconnect could be the horror stories many New Zealanders are hearing from their friends, and the younger generation in their families.
That’s because under the relatively low headline unemployment rate are shockingly high numbers of long-term unemployed, high levels of youth unemployment, and extensive under-employment.
“There’s no doubt that when you know people who are doing it tough, it rubs off on you,” says Kiwibank economist Jarrod Kerr.
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November will see New Zealanders head to the polls for a general election, with the levels of people having been unemployed for more than a year the highest since 1995.
The number of men and women who have been unemployed for more than a year ticked over 31,000 in the first three months of the year, and Kerr says recruiters have told him that it is the young, and the over 50s who are suffering most.
“There’s this bias for a middle-aged workforce,” he says.
Back in 1995, the population was just 3.7 million compared to 5.3m today, however, at the end of March this year, there were 31,800 people who had been unemployed for more than a year, up from 18,500 a year before.
“The long-term unemployed is unusually high compared to recent cycles,” says Westpac senior economist Michael Gordon. “For people who are out of work, it’s quite difficult to get back in.”
Sentiment on the jobs market was shown in the June Westpac-McDermott Miller Employment Confidence Index to be at its lowest level since the index was created in 2005.
At the end of June 216,009 people were scraping by on Jobseeker Support, up from 196,434 a year earlier, and 173,130 a year before that.
It has been common to use the concept of a Misery Index to track how a population is feeling about their economic lives.
It is a measure derived by adding the headline unemployment rate in a country to its headline inflation rate, a combination meant to capture the sense of people’s money losing buying power, and how secure they are feeling about work.
Anything over 10% is definitely miserable in the New Zealand context, and anything from 8% to 10% is uncomfortable. However, there is a current disconnect between employment confidence and the level of New Zealand’s Misery Index.
The Westpac-McDermott Miller Employment Confidence Index was lower in June than it was in 2008, 2009, 2010, 2011, 2021, 2022 and 2023; years which had higher misery scores.
The Misery Index at the end of March was 8.4%, which was fractionally lower than the 8.5% at the end of December, but was lower than at any point between December 2021 and December 2023.
Gordon says an obvious criticism of the Misery Index is that it is not weighted, but it could also miss other aspects of people’s economic experience, including referred fear from the struggles of the long-term unemployed, or the experiences of younger job-hunters, whose families would bear witness to their struggles.
A NEET Misery Index for people aged 15 to 24 who were not in employment, education or training would be 17.5%, which is at the higher end of the scale of New Zealand’s economic experience.
Students, and newly ex-students, have been finding things especially hard, according to employment agency Student Job Search (SJS), which says in the past financial year it had 434,000 applications for just 53,000 positions.
And Kerr points out that a Misery Index for those who are under-employed, and desperately wanting more hours to stretch their incomes to cope with inflation, would be around 16%.
Economists think people’s actual experience of economies suffering from similar Misery Index levels could also vary, depending on how long the miserable conditions have persisted.
Infometrics chief forecaster Gareth Kiernan says New Zealanders have experienced a succession of bad news, and economic malaise, which started with Covid arriving in New Zealand in late 2019.
In more normal times periods of economic struggle, and high inflation, were offset by better periods.
“There hasn’t been a period where incomes have raced ahead of costs,” he says.
Kerr says there has been a “relentless accumulation of pain in household budgets. This has been something that has been going on for over three years where inflation has been running well above wage increases”.
Just last week, Kiwibank revealed savings data that indicated many people had had to dip into savings, or borrow, just to pay for essentials.
Kiernan pointed to the possibility that people’s perceptions of their job prospects could be influenced by factors like global instability and conflict.
“The situation is probably more uncertain than it has been for 40 years now, particularly when it’s coming from what you think are allies,” Kiernan says.
History has shown that New Zealanders sometimes vote out governments when the economy is weak and times are tough. A survey by The Post last month showed more people blamed the current government than the previous Labour-led government for the state of the economy.
Voters could potentially decide to punish the current government in the November election for not protecting them from it, Gordon says.
“It’s a bit rough on the incumbent government, because it’s not something they caused. Trump is the instigator,” Gordon says.
US President Donald Trump’s war on Iran was behind the huge surge in fuel prices that has undermined New Zealand’s return to growth.
“The momentum was starting to pick up at the start of the year. Had it not been for the surge in fuel prices, we could have been looking at a year of quite decent growth,” Gordon says.