Activity surged 2.6% even as unemployment climbed to an 11-year high

The recovery finally looks broad

Infometrics’ June 2026 Quarterly Economic Monitor is the clearest positive signal of the current cycle. All 16 regional economies expanded in the June quarter, with activity up 2.6% in the quarter and 1.7% over the year. That is a genuine step change from March, when only 12 of 16 regions were growing and national job numbers fell 0.2%.

Infometrics principal economist Nick Brunsdon says growth is being “led from the south, with Southland, Otago, Canterbury and Nelson-Tasman all growing at over 2 percent“, with Waikato and the Bay of Plenty now joining in. The Iran War, which pushed oil prices up from February, has hit less hard than feared. That is partly, Brunsdon notes, “because of the weaker economy last year, and less of an intense hit to the economy – so far“.

The activity numbers back the story. Tourism guest nights rose 3.6%, driven by a 9.1% lift in international visitors, and building consents jumped 19% to more than 40,000 over the year. The drag is the household: card spending rose just 0.6%, and real volumes fell 1.5% once inflation is stripped out, with fuel costs squeezing discretionary budgets.

The jobs number is going the wrong way

The labour market tells a bleaker story. Unemployment hit 5.6% in the June quarter, the highest since September 2015, with 171,000 people out of work. Underutilisation climbed to a 12-year high of 13.8%, or 440,000 people.

Job numbers did rise 0.4% nationally, including a 0.3% lift in Auckland after two years of decline. But six regions still shed jobs, and the headline rate keeps rising because the workforce is growing faster than hiring.

EMA head of advocacy Alan McDonald puts it plainly. “Many businesses have been focused on retaining the staff they already have rather than taking on new employees,” he says, with higher costs and global uncertainty pushing firms to delay investment. Westpac senior economist Michael Gordon calls it a “low-fire, low-hire” market.

BNZ head of research Stephen Toplis pushes back on the doom. “A singular focus on the unemployment rate overlooks the fact that the data confirm the economy is turning the corner,” he says. ASB is blunter on timing, warning that “a meaningful improvement in the labour market is more of a 2027 story“.

A north-south split you can’t ignore

The divide between the islands is the sharpest feature of the data. North Island unemployment hit 6.0%, up from 5.3% a year earlier, while the South Island sat at 3.7%. Stats NZ confirms the pattern in filled jobs: Canterbury led with +1.9% (5,842 jobs), followed by Waikato and Auckland, while Northland fell 2.2% (1,591 jobs).

Xero’s small business data reinforces it. Agricultural regions ran hottest, with Canterbury sales up 12.3%, Manawatu-Whanganui 11.9% and Waikato 10% in the quarter, ahead of Auckland and Wellington. But the lag is real: small business jobs rose just 0.7% and wage growth slowed to 1.5%, the weakest in the Xero series since 2017.

Why the hiring dam may be about to break

The most under-reported figure sits in MBIE’s Jobs Online release. Online job ads grew 7% annually to June, the fourth straight quarter of growth after 11 quarters of falls, spread across seven of nine industries and nine of ten regions.

McDonald points out the June quarter data “reflects what businesses were experiencing during April, May and June“, and that more recent confidence and PMI figures are more encouraging.

That is the practical takeaway. Unemployment is a lagging indicator, and in some regions the activity recovery is already four quarters old. Employers who wait for the headline rate to fall before hiring may find themselves competing for scarce talent in Canterbury, Waikato and Southland, where the market is already tighter than the national number suggests.

The election overhang

Finance Minister Nicola Willis acknowledged businesses had been doing it tough with higher costs and uncertainty deterring hiring. The election adds another layer of caution. Deferring investment until policy is clear is rational, but it means the jobs recovery will trail the activity recovery by longer than the fundamentals warrant. Brunsdon remains “concerned about the pace of recovery over the rest of 2026 amid continued global uncertainty“. The output has turned. The question now is which employers move first.

Sources

• Brighter economic outlook despite rising unemployment and election uncertainty (2026-08-20)
• Unemployment rises to 11-year high of 5.6% (2026-08-05)
• Small firm sales up, but jobs and pay are not (2026-07-30)
• New Zealand’s jobless rate hits 5.6% in June quarter, highest in over a decade (2026-08-05)
• Economists see some good signs in latest labour market data (2026-08-05)
• Widespread economic recovery, ahead of the storm – Infometrics March 2026 QEM (2026-05-21)
• Employment indicators: June 2026 (2026-06)
• Businesses holding back on hiring as labour market weakens (2026-08-05)
• NZ labour market review chartpack Q2 2026 (2026-08-05)