A survey from Westpac signals a slight uptick in the labour market, suggesting unemployment has likely topped out at 5.3%.
The Westpac-McDermott Miller Employment Confidence Index (ECI) climbed 3.9 points to 93.8 in the December quarter.
Although it marked the highest reading since March 2024, the index stayed in subdued territory, according to Westpac. Readings below 100 show more households feeling pessimistic than optimistic about the job market outlook.
“New Zealanders still see jobs as being in short supply,” Westpac senior economist Michael Gordon said.
“However, there was a slight improvement in the December quarter, consistent with our view that the unemployment rate has peaked at its current level of 5.3%.”
“There’s a growing sense that the economy has reached a turning point, although the labour market is typically one of the more lagging aspects of the economic cycle.”
“For that reason, we expect only a gradual improvement in the unemployment rate over the course of 2026.”
Both current and anticipated earnings growth stayed subdued during the December quarter.
“The existing slack in the labour market means that workers’ negotiating power has decreased, and with inflation back in the target range, cost-of-living increases have become correspondingly smaller,” Gordon said.
“In particular, the earnings measures of the survey were weaker in dairy-intensive regions such as Northland, Waikato, Canterbury and Southland.”
He noted that recent drops in dairy prices could be dampening earnings expectations in the said regions.
Regarding confidence levels among employees in both the private and public sectors, private sector employees’ confidence rose 5.2 points to 96.8 this quarter, while public sector employees’ confidence edged up 1.9 points to 96.