New Zealand’s Unemployment Crisis: Jobless Rate Soars to 5-Year Peak Amid Economic Freefall

Kiwi economy grinds to a halt as unemployment spikes—just when you thought traditional finance couldn't get any worse.

Economic Engine Sputters

New Zealand's labor market is buckling under pressure, with joblessness hitting its highest level since 2020. The numbers don't lie—this isn't a blip, it's a full-blown trend.

Domino Effect in Motion

When employment tanks, everything follows—consumer spending, housing demand, even that overpriced avocado toast economy. Meanwhile, Bitcoin's hashrate keeps climbing. Coincidence?

Another quarter, another reminder why decentralized finance laughs at 'business cycles'. The RBNZ might want to consider mining some BTC instead of printing NZD.

Participation drops as workers step back

As previously pointed out, more people were jobless, and fewer people were even looking for work. The labour force participation rate — the working-age population either with a job or actively seeking employment — declined to 70.5%, down from Q1’s 70.7%. That marked the lowest level since early 2021.

However, the hit has been even harder on mid-teenagers and young workers when we dig deeper into the data. Whether it was an artificial boom in the few months when workers were hard to come by during the post-pandemic hiring spike, many went into the labour market. Nonetheless, when the economy takes a hit and employers engage in less than whiplash hiring activity, these groups are often the first out of the door.

Teenagers, in particular, were leaving the job market, many opting to return to school or study rather than being classed as jobless, said Michael Gordon, senior economist at Westpac in Auckland. 

Year-on-year, total employment fell by 0.9%, confirming that the slowdown is not just a seasonal blip, but part of a broader cooling in the economy.

Workers see slower wage growth amid rising costs

Adding to the unease is a continued slowdown in wage growth. According to today’s report, annual wage inflation slowed for the ninth consecutive quarter.

Ordinary time wages for non-government workers ROSE just 2.2% compared to a year earlier — down from 2.5% in the previous quarter. That signals a diminishing bargaining power for workers, even as the cost of living remains high for many households.

Despite the year-on-year slowdown, quarterly wage growth grew slightly, rising 0.6%, above economists’ expectations of 0.5%.

Meanwhile, average ordinary time hourly earnings for non-government workers jumped 1.9% from the previous quarter — the strongest quarterly rise since Q3 2020.

Although the rise in pay growth looked encouraging, some analysts dismissed it as potentially short-lived or a function of different types of workers making up a larger share of employment rather than broad wage inflation. Businesses may be dishing out higher wages to keep on skilled workers while pulling back elsewhere in terms of headcount.

That said, real wage growth underperforms for many employees, while inflation remains elevated and still tightens household budgets. 

The labour market data has added weight to expectations that the Reserve Bank of New Zealand (RBNZ) will soon resume cutting interest rates.

The RBNZ had forecast a 5.2% unemployment rate in May, but it also predicted employment growth of 0.2%, a clearly missed target.

With inflation showing signs of easing and economic growth stalling, pressure is mounting on the central bank to support the economy.

Most analysts now expect the RBNZ to cut the Official Cash Rate (OCR) by 25 basis points to 3% at its next meeting on August 20, especially after pausing in July.

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