New Zealand’s Unemployment Rate Sees Slight Increase Amid Economic Adjustments

In the final quarter of 2024, New Zealand witnessed a minor uptick in its unemployment rate, reaching 4.0%, as revealed by recent data from Statistics New Zealand. This shift indicates a subtle easing in the labor market’s capacity pressures, contrasting with the expectations of economists who had projected the unemployment rate to rise to 4.2% alongside a 0.3% growth in employment. Instead, employment grew by a slightly higher rate of 0.4%.

Reflecting on this development, Becky Collett, Senior Manager of Work and Wellbeing Statistics, remarked that unemployment rates have reverted to their 2019 levels after experiencing historic lows. This change is attributed to the unique economic period between 2021 and 2022, characterized by restricted borders that curbed supply increases while labor demand surged.

Additionally, the quarter saw a modest increase in wage inflation, with the private sector labor cost index (LCI) excluding overtime climbing by 1.0%, surpassing the previous quarter’s 0.8% rise and the anticipated 0.8% forecast. This data underscores a growing momentum in wage growth amid the evolving economic landscape.

The labor force participation rate stood at 71.9%, with an employment rate of 69%, reflecting a robust engagement in the labor market among New Zealanders.

These labor market dynamics are keenly observed by the Reserve Bank of New Zealand (RBNZ), which, as of November, maintained the cash rate at 5.5%. The RBNZ has hinted at the possibility of further rate hikes if inflationary pressures do not subside, signaling a careful balancing act between stimulating economic growth and controlling inflation.

This nuanced shift in New Zealand’s labor market offers a glimpse into the broader economic challenges and adjustments facing the country as it navigates post-pandemic recovery and aims to sustain growth while ensuring inflationary pressures are kept in check.