'Crisis level': NZIER warns economic recovery alone won't solve surging youth unemployment, saying it's 'a serious problem that cannot be left to resolve itself''

The New Zealand Institute of Economic Research (NZIER) says youth unemployment and underutilisation rates in NZ have risen to levels last seen around the Global Financial Crisis (GFC).

A new report released by the independent economic consultancy on Friday warns structural factors are likely to be only partially responsible for the country’s high youth unemployment and NZ’s economic recovery alone may not be enough to solve the issue.

Since the Covid-19 pandemic, unemployment among 15 to 19-year-olds has jumped to 25.3%, according to the NZIER, while it has risen to 12% among 20 to 24-year-olds. These rates are similar to those at the peak of the GFC.

It means the unemployment rate for 15 to 19-year-olds is currently roughly seven times the rate for those aged 25 and over, while the unemployment rate for 20 to 24-year-olds is more than three times the rate for those aged 25 and over.

“But the overall unemployment rate has remained relatively stable. While young New Zealanders are experiencing crisis-level unemployment, underutilisation, and NEET (not in employment, education or training), older workers have held steady,” the NZIER said.

New Zealand’s official jobless rate rose to 5.6% in the June quarter, the highest it has been for more than a decade, with young people experiencing the largest increase in underutilisation in the June 2026 year.

The underutilisation rate measures the untapped capacity in the labour market, or people who would like to work more. It includes unemployed people, the potential labour force and underemployed people. Statistics NZ views this metric as just as important as the unemployment rate.

Technology moving ‘very fast’

The NIZER said NZ’s slow economic recovery has made employers cautious about investing in capital and in people, with uncertainty about artificial intelligence (AI) heightening hesitancy about hiring new labour market entrants. This has left young people unsure of the value of their investment in education and training.

“Longstanding weaknesses in the link between education and training and the labour market have left young people increasingly poorly matched to available jobs, and rapid technological change is worsening this mismatch. Unhelpfully, government policies have been at odds with labour market conditions. An unusual and complex mix of cyclical and structural factors calls for a strategic mix of employment support and a long-term strategy.”

NZIER principal economist Sarah Hogan said NZ’s education and training sector has always been slow to adapt.

“But the impacts of that are worse when technology is moving very fast and in ways that make it unclear what skills employers and workers will need in the near future,” she said.

Youth employment has reached ‘crisis level’ creating a future liability

The NZIER’s report said young people have always been more exposed to economic downturns because they have less experience, shorter job tenure and are more likely to work in cyclically sensitive industries. But the current situation is “strikingly different.”

“Youth unemployment has reached a crisis level without an economy-wide unemployment crisis,” the NZIER said.

“The underutilisation of young workers creates a future liability: a generation that is less experienced and potentially less productive, likely less mentally and physically healthy, and less economically secure than their parents.”

The higher rates of youth unemployment, underutilisation and NEETs also mean more young people will spend long periods out of work and miss the chance to gain experience, build skills, earn income and begin saving. This includes early KiwiSaver contributions that compound over a lifetime.

NZIER senior economist Daniel Hamill said many young people may be “locked out in a perfect storm.”

“We can't be certain about the role of each individual factor, but there appears to be a complex combination of cyclical and structural risks at work, including a sluggish recovery, business uncertainty, unhelpful policy responses, pre-existing structural problems, accelerating technological change and increasing reliance on temporary migrant workers in some sectors where young people are also concentrated,” he said.

'A serious problem that cannot be left to resolve itself'

According to the NZIER, the lack of a shared problem is likely one reason that youth unemployment hasn’t had the pre-election attention that it might normally attract.

The latest labour market statistics from Statistics NZ found that while younger people are struggling with employment, it's a different story for older age groups, with the strongest job growth in the latest labour market data being among those over the age of 65.  

The unemployment rate for this age group was at 1.4% in the June 2026 quarter, a decrease from 1.6% in the previous year. The underutilisation rate for those 65+ was at 8.3% in the June 2026 quarter, the same rate as a year ago. 

“Current labour market conditions for young people are a serious problem that cannot be left to resolve itself,” the NZIER said.

“New Zealand needs a coherent workforce strategy to improve long-term economic resilience.”