But the labour market remained weak and disinflationary in the first quarter, economists said.
The report “looked to be a little better than expected ... but it wasn’t”, Kiwibank chief economist Jarrod Kerr said.
“The details of the report were weak. Workers may not be losing their jobs, but many are losing valuable hours.”
The underutilisation rate rose 0.1% for the quarter and was up 1.1% year on year.
“Hours worked fell a hefty 2.9% over the year and has been declining for five consecutive quarters,” Kerr said.
The number of people in fulltime employment fell by 45,000 over the year, while the number in part-time employment grew by 25,000.
“Approximately 21% of employed people work part-time – 12% of men and 30% of women,” Stats NZ said.
Part-time job numbers “surged” 2.2% in the first quarter, up 4.3% year on year, ASB senior economist Mark Smith said.
The labour market was still “softening”, Smith said.
Firms had significantly cut back on fulltime hiring in the first quarter.
Employment rose just 0.1% in the quarter and was now 0.7% lower than a year ago.
“It has been a difficult period for the NZ jobs market, with a net 20,000 jobs being shed since the March 2024 quarter,” Smith said.
Employment remained relatively flat over the March 2025 quarter (up 2000) and decreased 21,000 annually to 2,914,000.
Infometrics economist Matthew Allman noted that the labour force participation rate fell from 70.9% to 70.8% in March 2025, the lowest rate since June 2020.
“The falls reflect working-age people exiting the labour force to potentially enter into education or training, moving overseas or otherwise not actively seeking work,” he said.
The underlying details were weak and disinflationary, ANZ senior economist Miles Workman said.
While there was wage growth, it was weaker than the Reserve Bank’s expectations, Workman said.
The private sector labour cost index rose 0.4% q/q, with annual growth slowing 0.4% points to 2.6% year on year – weaker than the RBNZ’s forecast of 2.7%.
Private sector average hourly earnings rose 0.2% for the quarter.
That saw the annual rate slow 0.2% points to 3.8%, well below the RBNZ’s forecast of 4.6%, he said.
Meanwhile, public sector average hourly earnings rose a “whopping” 2% for the quarter, taking annual growth from 4.5% to 6.6%, he said.
“Public sector wage growth is well in excess of that in the private sector and inflation. Past public sector pay agreements (which spanned multiple years) mean public sector wage growth is poised to outpace that of the private sector for a while yet.”
Looking forward, global trade and the confidence shock brought about by US tariff policy could still incite some hesitancy among some New Zealand firms looking to hire and invest, Workman said.
Depending on how much of that was “centralised” into the RBNZ’s May forecast, it could easily eclipse the small surprises we’ve seen in first quarter GDP, inflation and labour market data, he said.
“We remain comfortable with our expectation that the RBNZ will ultimately cut the OCR to 2.5%, and we wouldn’t rule out a 50bp cut at some point along the way should things deteriorate (but certainly not in reaction to today’s data).”
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
