The 0.2 percentage point drop in the official unemployment rate is unexpected, but is offset by a drop in work hours and people not actively seeking work, figures show.
The unemployment rate dropped from 4.2 percent in the previous quarter to 4 percent in the three months to June 2020. Based on an overall average over 13 weeks, the results capture the majority of the level 4 lockdown period, which started on March 26.
During the same period, workforce underutilisation rose to 12 percent: the highest quarterly rise since 2004. Hours worked dropped by a record 10.3 percent.
Ahead of the results, Statistics New Zealand labour market manager Sean Broughton warned it was important to "look beneath" the headline unemployment figure. Following Wednesday's announcement, he emphasised that underutilisation included three measures. Unemployment was just one of those.
"That fall [in unemployment] was more than offset by the rise in underemployment... that's people working part-time but are willing and able to work more hours," Broughton said.
The 'potential labour force' - people who wanted a job but weren't actively seeking one, rose.
"You take those two together, and that's what's driving the quarterly increase in underutilisation."
A separate measure, 'hours worked', looked at the number of hours people had worked in the previous week, compared to the number of hours they usually worked.
"We've seen a massive fall in the number of hours actually worked by people," Broughton added.
Put into context, as the unemployment figure of 4 percent is based on a 13-week average, the high and low points have been removed. Broken down week-by-week, the data showed that unemployment increased throughout the June quarter.
"We know that there was an upward trend [of] unemployment."
"It may or may not signal what's coming in the September and December quarters," Broughton added.
Referring to the drop in unemployment as "simply unbelievable", a Kiwibank economist report released on Wednesday said it was important not to judge a labour market by its unemployment rate.
People weren't actively looking for work during lockdown, therefore those who would typically classify themselves as unemployed, weren't counted.
"The underutilisation rate jumped, and total hours worked plunged, by record rates over the quarter," it said.
The market consensus was a jump in unemployment to 5.5 percent. The bank had predicted a smaller lift, to 5.2 percent. With the wage subsidy coming to an end, it expects unemployment to rise.
"The sugar rush of post-lockdown spending in recent months is likely to fade. Business confidence surveys show that more firms intend to cut headcount...we expect the unemployment rate will peak at the end of the year," the bank said.
Kiwibank economist Mary Jo Vergara said the June unemployment figures indicated a much higher proportion of unemployed women than men.
"In the June quarter, 11,000 Kiwis lost their jobs: 10,000 (90 percent) of them were women," Vergara said.
Historically, women were over-represented in service-related jobs, such as hospitality, health, education and aged-care and more assumed a caregiver role, which could explain why the number was skewed.
The wage subsidy had helped many businesses stay afloat and keep their people employed. For many, the payout may have delayed the inevitable.
"Once the lifeline comes to an end, job losses will mount - and there'll (still) be a pinkish hue to the numbers."