The NZ unemployment rate rose to 5.7% in the September quarter, the highest since 2015, with 174,000 people out of work. What it means for households and OCR.
The NZ unemployment rate rose to 5.7% in the September 2026 quarter, up from 5.6% three months earlier and the highest level in more than a decade. Figures released by Stats NZ on Wednesday show around 174,000 people were unemployed between July and September on a seasonally adjusted basis. The last time the jobless rate sat this high was the September quarter of 2015.
The result was worse than nearly every forecast. Economists at ANZ and BNZ had pencilled in 5.6%, Westpac and ASB expected 5.5%, and Kiwibank had picked 5.4%. The Reserve Bank itself had projected 5.5% in its September Monetary Policy Statement. For a detailed breakdown of the Stats NZ figures, including underutilisation and wage measures, interest.co.nz has published the full set of numbers.
Table of Contents
Behind the Rise in the NZ Unemployment Rate
The latest increase continues a steady climb that began after the labour market peaked in 2021 and 2022. Unemployment reached 4.0% by December 2023, rose to 5.1% by the end of 2024, and has kept edging higher since. Employment has broadly stalled: about 2,891,000 people were in work in the September quarter, slightly fewer than the 2,896,000 recorded in the June quarter, while the employment rate stood at 66.4%.
Participation also slipped, from 70.6% to 70.4%, meaning a slightly smaller share of working-age people were either in a job or actively looking for one. That can sometimes flatter the jobless rate, because people who give up looking are not counted as unemployed. In this case, unemployment rose even with weaker participation, which underlines how soft hiring has become.
One of the more worrying details is the length of time people are spending out of work. The share of unemployed people who had been jobless for more than a year rose to 21.5%, up from 19% in the previous quarter. Long spells of unemployment tend to erode skills and confidence, making it harder for people to return to work even when demand recovers.
A Shift Towards Part-Time and Casual Work
The quality of available work also appears to be changing. Seasonally adjusted full-time employment fell by 17,000 over the quarter, while part-time employment rose by 15,000. Stats NZ noted a growing proportion of people working part-time, which contributed to lower hours worked.
Over the year, casual employees increased by 19,100 to 116,900, and fixed-term employees rose by 8,100 to 50,900. Permanent roles still account for the vast majority of paid employees, at 91.3%, but the growth in less secure arrangements suggests employers are reluctant to commit to permanent hires while the outlook is uncertain.
The broader underutilisation rate, which also captures people who want more hours and those who would like work but are not actively searching, held at 13.8%. That represents around 438,000 people, a level last seen around the end of 2013. Underutilisation was markedly higher for Māori, at 22.3%, and Pacific peoples, at 21.2%, and the share of young people aged 15 to 24 not in employment, education or training rose to 14.1%.
Pay Growth Slows as Slack Builds
With more people chasing fewer roles, bargaining power has shifted towards employers. Annual wage inflation came in at 2.1%. Average weekly earnings for full-time employees rose 3.3% to $1,743, while average hourly pay increased 2.9% to $44.86. Those earnings measures include gains from people changing jobs, being promoted or working extra hours, so they tend to run ahead of underlying wage rates.
For many households, pay rises of around 2% to 3% are not keeping much ahead of living costs, particularly with fuel prices elevated this year. Workers in casual or part-time roles may be seeing even less, given the drop in hours.
What It Means for Interest Rates
The labour market is one of the key inputs the Reserve Bank weighs when setting the official cash rate. The RBNZ unexpectedly left the OCR on hold on 28 October, and Governor Breman has signalled that the next move is likely to be up. Financial markets have been pricing a high chance of a hike at the December meeting.
A rising NZ unemployment rate complicates that picture. A weaker jobs market tends to cool wage pressure and household spending, both of which ease inflation over time. The Reserve Bank had already noted that the economic fallout from the Middle East conflict was likely to dampen growth and slow hiring relative to population growth, and it expects unemployment to fall later as the economy recovers. A worse-than-forecast result may give the central bank more reason for caution before tightening, although it will be balancing that against inflation pressures from fuel and the exchange rate.
What Households and Investors Should Do Now
For households, a softer jobs market is a reason to revisit financial resilience. Building an emergency fund that covers several months of essential costs, checking whether income protection or redundancy cover is in place, and avoiding new high-interest debt all reduce the damage if a job is lost. Mortgage holders refixing soon should consider how secure their income is when choosing a term, since a lower repayment can matter more than shaving a few basis points off the rate.
For investors, the NZ unemployment rate is a lead indicator for consumer spending, which affects listed retailers, discretionary brands and property trusts with retail exposure. Weak hiring can also weigh on bank lending growth and credit quality, though mortgage arrears have so far remained relatively low. Bond investors will watch whether the data shifts expectations for the OCR, since a softer outlook for rates would generally support fixed-income prices.
Conclusion
A 5.7% jobless rate confirms that New Zealand’s labour market has continued to weaken through 2026, with more long-term unemployment, a shift towards part-time and casual work, and modest pay growth. The result was worse than economists and the Reserve Bank expected, adding uncertainty to the interest rate outlook. Households should prioritise financial buffers, while investors should watch how weaker employment flows through to spending, credit and the path of the OCR.
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