Employment edges up, but job market remains weak
New Zealand’s labour market remained subdued in June, with filled jobs edging up just 0.1% – a figure economists expect will be revised lower.
According to Westpac senior economist Michael Gordon (pictured left), the June result aligned with expectations of a flat print but likely overstates the strength of the labour market.
“This measure tends to be overstated on its initial release, so we suspect this will be revised to a small negative,” Gordon said. “As we expected, the May result was also revised down from +0.1% to -0.1%.”
Filled jobs still 2% below peak
ASB senior economist Mark Smith (pictured right) also expects the June figure to be downgraded, continuing a trend of downward revisions.
“We expect the June print to be revised lower as the downward sequence of revisions shows few signs of abating,” Smith said.
ASB estimates the number of filled jobs was 0.3% lower in the June quarter and 2% below the March 2024 peak, adding downside risk to their forecast of a 0.1% drop in Q2 HLFS employment.
Services and construction weigh on national numbers
The data highlights a two-speed economy, with strength in primary industries but job losses in goods and service sectors.
“Construction and business services continue to see the biggest job losses,” Gordon said. “Public services (including health and education) and financial services are gradually rising.”
Smith noted construction jobs have fallen 6.0% over the past year, while manufacturing jobs dropped 2.5%. Overall, employment in the goods-producing sector declined 0.2% in June and is down nearly 6% from its September 2023 peak.
“Employment in the goods sector has retained its place as the soft spot for the NZ labour market,” Smith said.
Meanwhile, the services sector – which accounts for about 75% of total jobs – recorded a modest 0.2% rise in June but posted a 0.5% annual decline.
Youth, men, and North Island regions hit hardest
Young people remain disproportionately affected, with filled jobs down 9.6% year-on-year for those aged 15-19. Employment for 20-29-year-olds also declined significantly.
Job losses were sharper for men (-1.7% y/y) than for women (-0.9% y/y), while the North Island continues to underperform.
“Employment has been falling across the North Island, but has been steadier in the South,” Gordon said, noting recent strength in Southland.
Smith highlighted employment declines in Auckland (-1.9% y/y), Wellington (-2.3% y/y), and regional centres like Manawatū-Whanganui and Hawke’s Bay. In contrast, South Island regions such as Canterbury (0.1% y/y) and Otago (0.2% y/y) showed resilience.
OCR outlook: Hiring weakness may sway RBNZ
Both economists agree that soft hiring conditions will influence the Reserve Bank’s next move.
“Hiring tends to lag (and not lead) the economic cycle,” Smith said. “We expect hiring to remain anaemic over much of 2025.”
“The results for the June quarter suggest a 0.3% fall in the HLFS employment measure,” Gordon said. “However, the biggest job losses have been among young people, who are more likely to drop out of the labour force altogether. This will dampen the extent to which the unemployment rate rises.”
Smith said the softening labour market should help keep inflation in check.
“We expect a 25bp OCR cut in August, with the possibility that the OCR moves below 3% before year end,” the Westpac economist said.
For more insights, read the commentaries from Westpac and ASB.
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