The number of people out of work in New Zealand rose to 4.3 percent in the March quarter, Statistics NZ figures show.
Stats NZ said the number of people unemployed grew by 10,000 to 134,000. The figure was in line with most analysts' expectations.
"While the employment rate has declined from recent highs over the past year-and-a-half, it still remains high within the full Household Labour Force Survey timeseries, which began in 1986," Stats NZ labour market manager Deb Brunning said.
There were 355,000 people being underutilised in the March quarter, 16,000 more than the three months prior.
"Underutilisation not only includes people who are unemployed but also part-timers who want and are available for more work, as well as people who want jobs but were either unavailable to start work or were not actively seeking," Brunning explained.
"Increasing unemployment and underutilisation among young people (aged 15 to 24 years) comprised over half the national increase in each of these measures of spare labour capacity. Annually, youth unemployment rose 21,000 and youth underutilisation rose 44,100 (not seasonally adjusted).
"As employment among Aotearoa's rangatahi falls, statistics on youth not in employment, education, or training continue to provide important context around youth engagement in education along with the job market."
Over the course of the year, the unemployment rate was likely to rise to 5 percent before falling to 4.9 percent in early 2026, according to Reserve Bank (RBNZ) forecasts.
"Given the soft outlook for economic activity, and solid growth in the working age population, we expect additional capacity in the labour market to emerge over 2024," ASB senior economist Mark Smith said in a note.
"This should further temper wage increases and significantly dampen pressures on core inflation.
"Nonetheless, the RBNZ will be wary of the risk that labour cost inflation holds up for longer, making it difficult to achieve sub 3 percent inflation within an acceptable timeframe. That caution means a longer period of restrictive OCR (official cash rate) settings, with rate cuts unlikely to be delivered until 2025."
Wages still rising
New Zealand's salary and wage rates increased by 4.1 percent in the year to March, the figures also showed.
That labour cost growth slightly outstripped inflation, which was sitting at 4 percent.
Public sector wages were up 5.6 percent annually.
"The health care and social assistance industry was a large contributor to the annual increase... Total average hourly earnings (including overtime) were up 8.1 percent and wage cost inflation was 6.3 percent for this industry," Stats NZ said.
Wednesday's labour cost growth figures "do not point to an imminent cooling" in core inflation, Smith said.
"Our expectation is that the NZ unemployment rate will continue to head higher, moving above 5 percent by the end of 2024 and peaking at about 5.5 percent by mid-2025.
"In time this should lead to a moderation in wage and labour cost growth and core inflation. More moderate earmarked increases in the minimum wage from April (just 2 percent) should help.
"However, the inherent stickiness of labour costs and core inflation will be of concern to the RBNZ. The bank will be wary of labour market and labour cost pressures failing to sufficiently cool to deliver sub 3 percent inflation in a sustained basis."
