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The unemployment rate hit 5.3% in the September 2025 quarter, according to figures released by Stats NZ today.

That is the highest rate since December 2016 (up from 5.2%).

There were 160,000 unemployed people in the September 2025 quarter, as measured by the Household Labour Force Survey.

The increase is in line with what economists had expected.

The majority of economists had forecast the topline unemployment rate to land at 5.3% (up from 5.2% in the June quarter).

The unemployment rate for young people experienced a significant increase over the year, Stats NZ said.

The unemployment rate in the 15–24 age group increased to 15.2%, from 13.1% a year earlier.

The underutilisation rate was 12.9% in the September 2025 quarter, compared with 12.8% in the June 2025 quarter.

Underutilisation includes unemployed and underemployed people, along with the potential labour force.

It measures those who have some work but say they need more.

There were 138,000 underemployed people in the labour force in the September 2025 quarter, compared with 121,000 in the September 2024 quarter, Stats NZ said.

Underemployment is defined as part-time workers who have both the desire and availability to work more hours.

“Around two-thirds of those underemployed in the September 2025 quarter were women, reflecting the higher number of women who work part-time,” Attewell said.

While underemployment predominantly affects women, men working part-time were more likely to be underemployed.

Approximately one in four men working part-time were underemployed, compared with one in five women working part-time

The employment rate was 66.6% in the September 2025 quarter, compared with 66.8% in the June 2025 quarter.

In the September 2025 quarter, the number of employed people was 2,873,000, compared with 2,891,000 in the September 2024 quarter.

Economist predictions

Ahead of the data release economists said the more interesting labour market trends were likely to be buried in the detail of the survey, which also measures employment rates, participation rates and underemployment.

“We expect the data to show a soft labour market reflecting previous economic weakness, but with some signs of stabilisation,” BNZ senior economist Doug Steel said.

“The labour market tends to lag the economic cycle.”

Employment and demand for labour looked to be edging higher from a low level, Steel said.

“There are hints that this may be changing market dynamics as growth in labour supply is also slow.”

Westpac senior economist Michael Gordon said he expected falling youth participation in the labour market would continue to flatter the unemployment rate.

The participation rate – those actively engaged in working or looking for work – has dropped sharply in the past year as increasing numbers of young people have returned to study.

The Monthly Employment Indicators had shown that youth employment remains the biggest point of weakness for the labour market, he said.

That suggested a further drop in participation among young people was likely as they chose to stay in school for longer rather than entering the ranks of the unemployed.

“With jobs growth being insufficient to absorb the new entrants into the workforce, that implies a rise in the unemployment rate and/or a fall in participation,” Gordon said.

“Our forecast splits the difference – we expect a tick up in the unemployment rate from 5.2% to 5.3%, and a drop in the participation rate from 70.5% to 70.4%.”

Broadly, the ongoing slack in the labour market was expected to keep downward pressure on wages.

ANZ senior economist Miles Workman said: “Given the negotiating power is currently concentrated on the employer side of the table, we expect annual wage growth to slow.

“Wage inflation as measured by the private sector Labour Cost Index (including overtime) is expected to slow from 2.3% to 2.2%, and growth in private sector average hourly earnings (ordinary time) is expected to slow from 4.6% to 4.3%,” he said.

Hours paid and hours worked have contracted more sharply than employment in recent quarters.

That suggested firms were holding on to staff despite subdued demand for goods and services.

“If the economic recovery is delayed for too long, firms may lack the balance sheet capacity to continue hoarding labour in anticipation of it,” Workman said.

“That means the unemployment rate could rise more than we or the RBNZ are forecasting.”

The Reserve Bank (RBNZ) had mitigated this risk with its dovish pivot in August and outsized Official Cash Rate cut in October, he said.

“But long and variable lags mean we’re not out of the woods yet.”

ASB took a more optimistic view, picking topline unemployment to hold steady at 5.2%.

“The worst is behind us, but we don’t expect to see a meaningful lift in employment until 2026,” said senior economist Mark Smith.

The still-heightened competition for jobs would act to cap wage increases, with employees focusing on keeping their jobs rather than securing chunky wage increases, he said.