Unemployment remained the same and wage pressures were muted in the March quarter

Has New Zealand's unemployment rate peaked earlier than expected?

Contrary to virtually universal expectations the unemployment rate remained at 5.1% in the March quarter.

The Reserve Bank expected the rate to rise to 5.2% while major bank economists were forecasting 5.3%.

In addition, wage pressures were muted - which is potentially good news for the inflation rate, if not for individuals' pockets.

The seasonally adjusted labour force participation rate was 70.8% this quarter, compared with 70.9% last quarter. The participation rate represents those available for work, so, the figure means that some people have effectively stopped looking for work - which does reduce the unemployed number.

Employment rose 0.1% in the quarter.

ASB senior economist Mark Smith said the country looked to be "close to the cyclical peak in unemployment".

"...But [we] will need to see the tentative NZ economic recovery become more established so that firms have the rationale and confidence to increase hiring," he said.

"With inflation within the 1-3% target range, further monetary easing looks appropriate to support the labour market and NZ economy. We envisage a further 75bps [basis points] of OCR [Official Cash Rate] cuts over 2025. Given concerns over inflation resurfacing, we expect the RBNZ to proceed carefully."

The RBNZ began dropping the OCR from the cycle peak of 5.5% last August and the OCR is currently at 3.5%. The next review of it is due on May 28.

Statistics NZ's labour market spokesperson Abby Johnston said seasonally adjusted levels of unemployment remained at 156,000 between the December 2024 and March 2025 quarters. The unemployment figure was up by 22,000 annually, as measured by Stats NZ's Household Labour Force Survey.

The underutilisation rate in the March 2025 quarter was 12.3%, compared with 12.1% in the previous quarter. Underutilisation is a broad measure of untapped labour market capacity that includes unemployed and underemployed people, along with the potential labour force.

Stats NZ said while underutilisation did not change significantly over the quarter, it rose by 35,000 annually, to 390,000 in the March 2025 quarter. The increase came primarily from the annual rise in unemployment.

Stats NZ said in the year to the March 2025 quarter, all salary and wage rates (including overtime), as measured by the labour cost index (LCI), increased 2.9%. This compares with 3.3% in the year to the December 2024 quarter. Economists had forecast a higher figure.

And the separate measure of wage growth, private sector hourly wages, increased by 3.8%, which is likewise less than was expected. The RBNZ had expected a 4.6% figure.