Unemployment rises – but hiring rebound may not be far behind, says EMA

The Employers and Manufacturers Association (EMA) says the rise in unemployment to 5.4% in the December quarter, announced today, is disappointing but not unexpected.

Alan McDonald, Head of Advocacy at the EMA, says that unemployment is a lagging indicator and a raft of forward measures point to improving hiring conditions through 2026.

“We had hoped it would bottom out at 5.3%, even though some projections have it going to 5.5% by later this year,” says McDonald.

“Nevertheless, in recent months we’ve seen confidence, forward orders and activity firm up. Unemployment always lags the real economy and we’re confident we’ll see hiring pick up as 2026 progresses.

“Employers will wait to see those positives reflected in their own pipelines, and then they will resource up. Today’s increase in unemployment, while disappointing, is not inconsistent with that pattern of late-cycle labour market adjustment.”

Recent activity data backs this narrative. December readings showed manufacturing at a three-year high, with the BNZ-BusinessNZ Performance of Manufacturing Index (PMI) at 56.1. The services sector is also back into expansion, with the Performance of Services Index (PSI) at 51.5. Both indices show signs of momentum that typically flow into hiring following a lag.

“We’re also still hearing about skills mismatches, especially for entry-level roles after the COVID schooling disruptions. That makes work-ready skills and targeted training a priority so people can step into the jobs that are emerging.”

Migration dynamics remain a swing factor, with the net migration gain slowing to 11,900 in the year to October, adding to the importance of training and retention strategies for local firms.

Alan McDonald says “Today’s numbers aren’t good news for those affected – but they’re not the end of the story. The message from the wider data is that demand is rebuilding, and when firms have confidence in their forward orders, they’ll start hiring. Our focus is helping EMA members bridge the skills gap – so more Kiwis can get back to work as opportunities open up.”