Unchanging unemployment rate conceals underlying issues in New Zealand economy

New data reveals a mixed bag for New Zealand’s job market, with some sectors experiencing unexpected challenges. The unemployment rate, which held steady at 5.1% in the March 2025 quarter, may not be as positive as it appears at first glance. Despite the number of unemployed individuals remaining stable at around 156,000, economists anticipated a slight increase. Kiwibank’s Jarrod Kerr pointed out that while workers may not be losing their jobs entirely, many are experiencing a decrease in working hours. Full-time positions saw a decrease of 45,000 over the year, while part-time employment increased by 25,000. The total number of hours worked dropped by 2.9% annually, and underutilization, representing individuals looking for more work, rose to 12.3%.

Additionally, the labour force participation rate saw a slight decline to 70.8%, marking its lowest level since June 2020. This decrease suggests that a portion of the working-age population may be giving up on seeking employment. The current system in New Zealand appears to treat unemployment as a primary tool to combat inflation, according to commentator Max Rashbrooke. By putting thousands of people out of work post-pandemic to curb inflation, the approach, rooted in the 1980s doctrine of inflation targeting, has stirred debate on its fairness and effectiveness. Rashbrooke highlights the profound negative impact unemployment has on individuals compared to inflation, stressing the lack of a social insurance scheme in New Zealand to cushion the blow of job losses.

Notably, disparities persist for Māori and Pacific workers, with higher rates of unemployment. Māori unemployment rose to 10.5%, while Pacific unemployment reached 10.8% in the December 2024 quarter. This trend is exacerbated by cuts to public services and infrastructure projects that particularly affect industries where Māori and Pacific people are prominently employed. The global market also poses challenges, with the Reserve Bank’s Financial Stability Report warning of potential risks from Donald Trump’s tariffs. Sectors such as meat, seafood, and wine may face significant disruptions, threatening New Zealand’s economy. The report indicates potential economic slowdown from disrupted supply chains and reduced demand in major export markets, leading to hardships for heavily indebted households and businesses. Lower interest rates may be implemented to counteract these challenges in the future.