Unemployment has fallen sharply to 3.4 per cent in the September quarter, StatsNZ said this morning. 

This is the lowest level since the start of the Global Financial Crisis in 2008. 

The last time unemployment was below 4 per cent was in June 2008, shortly before the worst effects of the GFC hit the economy. 

The current rate is on par with the previous record low set in December 2007. 

The number of unemployed people fell by 18,000 over the quarter to 98,000, which, combined with 54,000 more people in employment, drove the unemployment rate down. 

The latest figures exceeded the expectations of economists. 

"The strong decline in unemployment brought the rate down to New Zealand's lowest rate on record, matching December 2007, when it was also 3.4 per cent," work and wellbeing statistics senior manager Becky Collett said. 

ANZ and Westpac economists both tipped the unemployment rate will fall to 3.8 per cent, while ASB sees it coming in at 3.9 per cent. 

The (Seasonally adjusted) employment rate rose 2 per cent to 2,830,000 in the September 2021 quarter. 

This quarterly increase came primarily from women (up 39,000, or 3 per cent) – the largest increase on record – with employment for men up 15,000 (1 per cent). 

"While employment growth was strong for both men and women, the number of women in employment saw the largest quarterly growth in the series," Collett said. 

Low unemployment rates combined with record low immigration have made it difficult for businesses to fill available roles amid the pandemic. 

"There is substantial evidence that the demand for workers is running hot, relative to supply. As a result, we expect to see a further acceleration in wage growth," said Westpac chief economist Michael Gordon in the lead up to the release of the data. 

The labour crunch has forced employers to pay more for work to be done. 

Looking ahead to 2022, ANZ expects the unemployment rate to continue falling - although its forecast for it to bottom out at 3.5 per cent next year has already been blown out of the water. 

With all eyes on inflation risk, there will also be great interest in the Labour Cost Index, also released today. 

That data showed that wages rose. The labour cost index (LCI) salary and wage rates (including overtime) increased 2.4 per cent in the year to September 2021, while the unadjusted LCI increased 3.8 per cent. 

Average ordinary time hourly earnings, as measured by the Quarterly Employment Survey (QES), increased 3.5 per cent over the year to reach $35.25. 

Today's data points to more inflationary pressure in the economy and could mean interest rates rising faster in the coming year.