Labour market statistics

Unemployment rate rises to 5.2%

6 Aug 2025

Our take on the latest Labour market statistics (Wed 6 Aug 2025)

Unemployment rate edges up to 5.2%

Employment down 0.9% from June 2024

Labour cost growth slowed to 2.4%pa

The unemployment rate rose to 5.2% in the June 2025 quarter (seasonally adjusted) to its highest rate since the COVID-19 peak in September 2020, and before that, December 2016. The unemployment rate was slightly below market expectations of 5.3%, but in-line with our and RBNZ’s forecast.
The underutilisation rate rose to 12.8% in the June 2025 quarter, rising from 12.4% in the March quarter, as underemployment and the potential labour force both expanded. The underutilisation rate was last this high in September 2020 when it was 13.1%.
Employment fell 0.1% in June 2025 from March (seasonally adjusted), and is now down -0.9%pa from the June 2024 quarter. There are now around 27,000 fewer people in employment than in the June 2024 quarter.
Labour cost growth continued to slow as more spare capacity appears in the labour market. The labour cost index rose 2.4%pa in June 2025 from a year ago, moderating from 2.9%pa in March. The moderation in the labour cost index was driven by public sector growth slowing to 2.8%pa from 4.2%, the slowest rate since March 2022. Private sector labour cost growth also slowed further, down to 2.3%pa from 2.6%pa in March, growing at its slowest rate since September 2021.

Unemployment rate, % of labour force, seasonally adjusted

The increase in the unemployment rate is consistent with expectations that still-weak economic trends are clear across the economy, and supports our view that we are at or near the peak for the unemployment rate. Most analysts have been expecting the unemployment rate to reach a peak in the September 2025 quarter for this cycle.
The weakness in the labour market is reinforced in other measures, including that the employment rate (66.8%) was at its lowest since December 2020. Total hours worked in the June quarter fell 1.0% from March, falling for the sixth consecutive quarter (seasonally adjusted). The total number of hours worked was 2.6% lower than a year ago, and at its lowest in three years (seasonally adjusted).
The labour market downturn has hit young people particularly hard, with the participation rate and youth employment rate both falling over the last year. The number of 15-24-year-olds in education increased by 18,000 people in the year to June 2025, up 5.0% from a year earlier. Conditions in the labour market could be leading to youth people staying in education longer or entering new education to upskill.
This trend towards training, or not seeking employment, saw the labour market participation rate falling further, from 70.7% (revised down from 70.8%) to 70.5%, the lowest rate since March 2021. There were an additional 13,000 people not in the labour force in the June 2025 quarter, compared to last quarter.

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