NZ Job Growth Slows, Fueling Rate Cut Bets as Unemployment Holds at 5.1%

New Zealand’s labor market showed signs of cooling in Q1 2025, with employment inching up just 0.1% and the jobless rate holding steady at 5.1%, near 4.5-year lows. The subdued figures reinforce market expectations for further interest rate cuts by the Reserve Bank of New Zealand (RBNZ) later this month and throughout the year.

According to Statistics New Zealand, employment growth matched economists’ forecasts, while the unemployment rate came in below the expected 5.3%. The RBNZ had projected a 5.2% jobless rate. Despite emerging from a technical recession in late 2024, New Zealand’s economic recovery remains fragile, pressured by weak domestic demand and global uncertainties tied to U.S. President Donald Trump’s trade policies.

The central bank has already slashed the official cash rate by 200 basis points since August 2024 to 3.5%, with markets now pricing in another 25bps cut this month and rates potentially dropping below 3.0% by year-end.

Wage growth also softened, with the private sector labor cost index (excluding overtime) rising 0.4% in Q1, below the 0.5% forecast and a slowdown from 0.6% in the previous quarter. The labor force participation rate dipped to 70.8% from 71%, reflecting a decline in youth engagement as more young people turn to education amid a tougher job market.

ANZ and ASB Bank economists noted ongoing labor market slack and weakening wage pressures point to subdued inflation, supporting further monetary easing. ASB expects an additional 75bps of rate cuts in 2025.

The New Zealand dollar was little changed after the data release, trading at 0.6010, as figures broadly aligned with market expectations.