New Zealand’s unemployment rate rose to 5.4% in the December 2025 quarter, up from 5.3% in the previous quarter, according to Stats NZ figures released today.

It now sits at its highest level since 2015, when it hit 5.7%.

The figure equates to 165,000 unemployed New Zealanders, up 5000 from the September quarter.

Economists had forecast the rate to have peaked, holding steady at 5.3%, or even falling slightly.

But while unemployment rose, so too did the number of people in employment.

The employment rate was 66.7% in the December 2025 quarter, compared with 66.6% in the September 2025 quarter.

That equated to about 15,000 more people in work in the final three months of 2025.

It was the first quarterly increase in employment since the June 2024 quarter.

The difference – and reason unemployment continued to rise – was an increase in the size of the labour market as more people entered looking for work.

“Over the quarter, we saw higher levels of engagement in the labour market as both employment and unemployment increased,” Stats NZ macroeconomic spokesman Jason Attewell said.

The data was ”not great but better than it looks”, ANZ senior economist Miles Workman said.

“[It] revealed stronger growth in both labour supply and labour demand than we and the RBNZ expected,” he said.

“But that certainly doesn’t mean the labour market is on a different (or more worrying) trajectory than expected – there is plenty of evidence here to suggest the recovery in economic activity is starting to have a positive influence on the labour market."

Auckland’s unemployment rate is now 6.4% and Wellington’s is at 5.8%.

Despite the topline rise, the December quarter labour market showed some early signs of improvement, Westpac senior economist Michael Gordon said.

“Overall, we think the results were broadly in line with the Reserve Bank’s forecasts and won’t give them much new to mull over ahead of their [February 18] policy review.”

Wage growth measures remained unsurprisingly subdued at this stage of the cycle, Gordon said.

The subdued nature of the data meant there would be little hurry for the Reserve Bank (RBNZ) to start hiking interest rates, he said.

Financial markets responded by paring back expectations for rate hikes later this year. The New Zealand dollar dropped by about 15 basis points to US60.45c on the news.

The labour force participation rate was 70.5% in the December 2025 quarter, compared with 70.3% in the previous quarter.

Labour force participation indicates the proportion of working-age people who are engaged in the labour market through employment or unemployment.

The labour force increased by 19,000 over the quarter, as the working-age population rose by 14,000 and the number of people not in the labour force declined by 6000.

While the number of men employed remained relatively steady, the growth in female employment drove a 15,000 increase in the total number of people employed in the December 2025 quarter.

Compared with the September 2025 quarter, 20,000 more women were in the labour force – 16,000 more employed and 4000 more unemployed.

The December quarter had shown the strongest growth in employment in 18 months, ASB senior economist Mark Smith said.

The rising workforce participation was also a positive sign, he said.

“The economic hole is still large, with the New Zealand economy still around 32,000 jobs shy of late 2023 peaks.”

The underutilisation rate was 13% in the December 2025 quarter, unchanged from the September 2025 quarter.

Underutilisation is a broad measure of untapped labour market capacity that includes unemployed and underemployed people, along with the potential labour force.

Finance Minister Nicola Willis highlighted employment growth in a statement.

“In addition, the hours worked and the number of people actively seeking work also increased,” she said.

“Together with other recent surveys showing rising business and consumer confidence, these are signs of a growing economy in which people see increased opportunity.”

But Labour finance and economy spokesperson Barbara Edmonds focused on the decade high for unemployment.

“Rising unemployment doesn’t happen by accident. It’s the consequence of decisions, and Christopher Luxon has chosen an economic plan that has cost tens of thousands of people their jobs,” she said.

Liam Dann is business editor-at-large for the NZ Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.