New Zealand unemployment dipped to 5.3 percent but wage growth slowed to a five-year low

New Zealand’s unemployment rate ticked down to 5.3 percent in the March 2026 quarter, slightly better than economist forecasts but coming alongside the slowest annual wage growth in five years and a sharp jump in youth joblessness.

Stats NZ released the figures on Wednesday morning, showing 163,000 New Zealanders were unemployed in the first three months of the year, down 2,000 from the December quarter but still 7,000 higher than a year earlier. The labour market added 4,000 jobs over the quarter, although the country still has 12,000 fewer filled positions than at this point in 2025.

The headline rate beat market expectations of around 5.4 percent and matched the Reserve Bank’s February projection. Wholesale interest rates barely moved on the release, with traders treating the result as confirmation that the labour market is stabilising at a softer level rather than improving.

The underutilisation rate, which captures the unemployed plus those who want more hours or are available but not actively searching, sat at 12.9 percent. That covers 406,000 people, a number that has crept up rather than down through the past year and reflects the volume of part-time workers in retail, hospitality and tourism who would take more shifts if they could get them.

ASB chief economist Nick Tuffley told RNZ it was “encouraging to see unemployment not creeping up, although part of that was the number of people looking for work didn’t increase”. Tuffley expects the rate to drift back up to about 5.5 percent through winter as employers respond to the Middle East conflict by pausing hiring decisions.

That hesitance is showing up in other data. ANZ’s latest business outlook survey recorded what bank economists described as a “wall of worry” among firms, with employment intentions softening sharply since the oil price spike in late April. ANZ New Zealand chief executive Antonia Watson summarised the current corporate mood as “watch, worry and wait” and urged businesses to keep contingency plans ready for further global volatility.

The most striking figure in the Stats NZ release is wage growth. The labour cost index rose just 2 percent over the year, the weakest annual pace in five years and well below the 3.1 percent rate of consumer price inflation. In real terms wages are going backwards, eroding household purchasing power even as headline employment holds steady. Private sector pay rose slightly faster than public sector pay, but neither kept up with grocery, rent or insurance costs.

Youth joblessness deteriorated again. The unemployment rate for people aged 15 to 24 climbed to 14.4 percent from 13.3 percent in the December quarter, and one in five women aged 20 to 24 is now neither working nor in training. Long spells of unemployment in the early career years tend to depress lifetime earnings and increase the chances of leaving the workforce permanently, which is why the cohort is closely watched by Treasury and the Reserve Bank.

Regional patterns hardened. Auckland, Wellington and the Bay of Plenty all sit between 6 and 7 percent, while most of the South Island is below 5 percent. The split mirrors the construction slowdown in the upper North Island, where consenting volumes for new dwellings remain well below their 2022 peak, and the relative resilience of dairy and tourism economies in Otago, Southland and Marlborough.

The employment rate, which measures the share of working-age people in paid work, was 66.7 percent. That sits well below the peak recorded in early 2023 but is consistent with the trend since the Reserve Bank lifted the official cash rate to 5.5 percent in 2023. Despite a series of cuts from that peak, the bank’s previously restrictive stance is still feeding through to hiring decisions with a long lag.

Outside the official release, several private indicators point the same way. Channel Infrastructure lifted its full-year profit guidance on Wednesday on the back of stronger fuel volumes through Marsden Point, suggesting freight activity is holding up despite the surcharges that Interislander and Air New Zealand have layered on in recent weeks. Westpac New Zealand also reported a 4 percent rise in half-year net profit to $545 million, although the bank flagged a marked rise in bad-debt provisioning, particularly across small business and commercial property loans.

For households the underlying picture is one of stalled progress. Headline unemployment has stopped climbing but pay packets are growing slower than prices, hours are shorter than workers would like, and the under-25 cohort is bearing a disproportionate share of the slack. None of that is consistent with a labour market that is genuinely on the mend, and most economists now expect the Reserve Bank to keep cutting through the rest of the year to coax firms back into hiring.

What do you make of these numbers? Are you seeing softer hiring intentions in your sector, or is wage growth holding up better in your patch than the national figures suggest? Drop your thoughts in the comments below.