Labour market statistics
Unemployment rate unchanged, weakness still evident
7 May 2025
Our take on the latest Labour market statistics (Wed 7 May 2025)
Unemployment rate stays at 5.1%
Employment down 0.7% from March 2024
Labour cost growth slowed to 2.9%pa
The key numbers...
- The unemployment rate was unchanged from December at 5.1% in the March 2025 quarter (seasonally adjusted). The unemployment rate was below market expectations of between 5.2% and 5.3% but remains at its highest since September 2020 (5.2%).
- Employment rose 0.1% in March 2025 from December, breaking the three quarterly declines in employment seen over 2024. The annual decline in employment remains significant at 0.7% and equating to around 21,000 less people employed than a year ago.
- Growth in the labour cost index narrowed further as the weaker labour market is putting less pressure on staff salary expectations. The labour cost index rose 2.9%pa in the March 2025 quarter, moderating from 3.3%pa over the year to December 2024. The slowing of labour cost growth was driven by the private sector which slowed from 3.0%pa to 2.6%pa. Labour cost growth fell slightly in the public sector from 4.5%pa to 4.2%pa but remains well above private sector growth.
- Spare capacity in the labour market continues to rise, with an additional 35,000 people underutilised compared to the beginning of 2024. The underutilisation rate was 12% in the March 2025 quarter, the highest since September 2020.
Number of employed 0.7%pa lower
Annual % change in number employed
...and our reaction
- We are nearing the peak of the unemployment rate, and the bottom of the labour market for this cycle. The unchanged headline rate is masking significant underlying weakness in the labour market, with a 2.9% annual fall in hours worked a real strain on the economic recovery.
- The New Zealand unemployment rate stayed above the OECD average, ranking 18th out of the 38 OECD countries. Over the past two years NZ has fallen down the rankings as unemployment has risen, falling from 6th in March 2022, 8th in March 2023, and 15th in March 2024.
- The labour force participation rate fell from 70.9% (revised down from 71.0%) to 70.8% in March 2025, falling to the lowest rate since June 2020. The falls reflects working-age people exiting the labour force to potentially enter into education or training, moving overseas or otherwise not actively seeking work.
- Job ads remain subdued, but we could see the ship begin to turn over the next few months, this data is more frequent and could give us an early indication of when the turn is likely to come.
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