Insights from Westpac and ABS
New Zealand’s labour market showed slight gains in March 2025, but economists warned hiring remains fragile, with young workers and urban areas still under pressure.
Employment remains flat in March
The Monthly Employment Indicator (MEI) rose by 0.2% in March, following a flat result in February.
“This measure typically gets revised down a bit from its initial release, so we’d consider this as an effectively flat outcome, in keeping with what we’ve seen over the last six months,” said Michael Gordon (pictured left), Westpac NZ senior economist.
Sector performance was mixed. Tourism-linked industries such as transport, retail, and hospitality saw modest hiring gains, alongside public services like health and education. In contrast, construction and business services continued to shed jobs.
Regional differences were also pronounced, with rural areas and the South Island outperforming the main centres.
“This split is likely to reflect strong agricultural export prices and the ongoing recovery in international tourism,” Gordon said.
The MEI, based on income tax data, typically predicts official labour force survey (HLFS) outcomes. Gordon said the March figures suggest a further rise in the unemployment rate is likely.
Early signs of recovery in primary and goods sectors
ASB senior economist Mark Smith (pictured right) said the March figures were “slightly stronger than expected,” with filled jobs up 0.2% month-on-month — the first quarterly gain in nearly a year.
He noted encouraging signs across multiple sectors:
- Primary sector jobs jumped 0.4% in March, reflecting improving commodity prices.
- Goods sector jobs increased 0.1%, the first monthly gain since September 2023, though employment remains 4.8% below mid-2023 peaks.
However, Smith warned the gains were from a low base and cautioned that “continued downside historical revisions suggest weaker underlying momentum.”
“Hiring tends to lag (and not lead) the economic cycle,” he said.
Services hiring stable but youth hit hard
Smith said services sector employment — which accounts for 75% of total jobs — rose 0.2% in March but remains 1% below year-ago levels.
“Job losses have been particularly acute in administration & support services (-5.7% y/y), but healthcare and social assistance hiring remains slightly more resilient (+1.7% y/y),” he said.
Meanwhile, younger workers continued to bear the brunt of job losses:
- Jobs for 15-19-year-olds fell 10% year-on-year.
- 20-24-year-olds saw a 3.6% decline, while 25-29-year-olds dropped 4.5%.
Urban centres lag as South Island leads
Smith noted that hiring losses were more pronounced in Auckland (-2.0% y/y) and Wellington (-2.1% y/y). In contrast, Canterbury and Waikato posted quarterly hiring gains of +0.4% and +0.2%, respectively.
Employment declines were larger among men (-2.0% y/y) compared to women (-1.2% y/y).
Outlook: Patchy hiring, OCR cuts expected
Looking ahead, economists expect labour market conditions to remain challenging through much of 2025.
“Increases in March hiring and the broad-based nature of gains were welcome... However, the March gains were from a low base,” Smith said.
He forecast patchy hiring, tempered by a fragile global environment and cautious business sentiment.
While a low-growth labour force — due to moderate immigration and lower participation rates — may limit further rises in unemployment, Smith expects unemployment to peak in the low 5% range in the first half of 2025.
“We expect a further 75bps of OCR cuts before the end of the year (2.75% OCR) as the RBNZ shifts from the policy brake to the accelerator to support the economy and labour market,” he said.
He added that weaker wage growth should help ease underlying inflation pressures, with more detailed forecasts to come in ASB’s forthcoming Q1 Labour Market Preview.
