New Zealand's Jobless Rate Rises to 5.2% in Q2, Excess Capacity Remains

New Zealand's jobless rate rose to 5.2% in Q2 from 5.1% in Q1, while the participation rate slipped to 70.5%. ANZ says the economy operates with a "considerable" degree of disinflationary excess capacity. The job market is in focus as the central bank considers an OCR cut.

WELLINGTON (Reuters) - New Zealand's unemployment rate rose to 5.2% in the second quarter, according to official data released on Wednesday. This marks an increase from the first quarter's rate of 5.1%, as employment fell 0.1% compared to the previous quarter [3].

The labor force participation rate slipped to 70.5%, the lowest level since the first quarter of 2021. The data showed a marked rise in young people staying or going back to education, indicating that current labor market conditions are influencing their choices [1].

Stats NZ reported that the economy shed about 2,000 jobs during the quarter and 16,000 jobs over the past 12 months. Full-time employment increased slightly, but part-time work decreased. The number of young people between 15 and 24 years not in education or training held steady at 12.9% [1].

The broad measure of wages showed overall growth slowing to 2.4% from 2.9% in the previous period. The data was close to Reserve Bank forecasts and is likely to support another 25 basis point cut in the official cash rate to 3% later this month [1].

Economists noted that the latest jobs and wages numbers would not stop a 25 basis point rate cut to the official cash rate (OCR) on August 20 to 3.0 percent, but ANZ senior economist Miles Workman noted that any concerted rise in the unemployment rate would see the OCR quite heavily reduced to give the economy a shot in the arm [1].

The New Zealand dollar was steady at US$0.5899 following the data release, and the chance of an August 20 rate cut reached 88% [2].

The Reserve Bank of New Zealand has cut its cash rate by 225 basis points since August 2024 to support an economy which sank into recession last year. The latest data indicates that the economy continues to operate with a considerable degree of excess capacity, which could slow the rate of inflation [2].

Financial markets are strongly picking a cut in two weeks, but then one more cut to a low of 2.75% early next year. Finance Minister Nicola Willis admitted the unemployment rate was not satisfactory but predicted it would come down later in the year despite uncertainty in the global economy [1].

References:
[1] https://www.rnz.co.nz/news/national/569145/unemployment-rate-rises-to-highest-level-since-2020
[2] https://www.businesstimes.com.sg/international/new-zealand-labour-market-remains-soft-adds-rate-cut-expectation
[3] https://money.usnews.com/investing/news/articles/2025-08-05/new-zealands-q2-jobless-rate-rises-to-5-2