Unemployment dropped to 4.7 percent in the March 2021 quarter, Statistics New Zealand has announced.
The 'underutilisation rate', which measures spare capacity in the labour market, increased 4 percentage points over the quarter, to 12.2 percent.
Released on Wednesday, the Labour Market Survey for the March 2021 quarter shows the official unemployment rate dropped from 4.9 percent in the December 2020 quarter.
A measure of people actively seeking and available for work, it marks the second drop in unemployment after it rose to 5.3 percent in the September 2020 quarter.
Compared to the December 2020 quarter, seasonally adjusted figures show the number of unemployed people dropped by 5000. There were 8000 less unemployed women, offset by 3000 more unemployed men.
Year-on-year, 13,000 more people were unemployed - 9000 more men and 4000 more women.
Statistics New Zealand senior manager Sean Broughton said the labour market had improved since COVID-19, but the unemployment rate was still high compared to recent years.
"There have been some gains in labour market outcomes - especially for women over the last two quarters - however annual changes indicate the labour market still hasn't returned to pre-COVID -19 levels for men or women," Broughton said.
Underutilisation rises over the March 2021 quarter
The 'underutilisation rate' rose to 12.2 percent: an annual rise of 1.8 percentage points.
In the March 2021 quarter, there were 366,000 underutilised people - 56,000 more year-on-year.
Compared to the December 2020 quarter, there were 7000 more underutilised men and 8000 more underutilised women (a total quarterly increase of 15,000 people).
Majority of underemployed were women
A key part of underutilisation is underemployment. It's defined as people working part-time but who are able and willing to work more hours. Year-on-year, the number of underemployed people rose by 31,000. Of these, just over half were women.
But from the December 2020 to March 2021 quarter, most of those who were underemployed were women. Of a total increase of 8000 people - 7000 were women.
"Its not overly surprising, given the impact of COVID-19 on women was more significant than it was on men," Broughton said.
The figures show more women were able to pick up work after the COVID-19 lockdown, but were still desiring more work.
"They continue to have a much higher rate of underemployment than men."
The number of people aged 15-24 not in the labour force because they were studying or training increased by 12,000 people over the year, to 186,000.
The unemployment rate for Māori was similar to the March 2020 quarter, at 8.7 percent, Statistics New Zealand said. For Pacific Peoples, it was 10.4 percent, higher than the rate of 7.8 percent a year ago.
Wage growth remained steady, up 1.6 percent year-on-year. Since December 2019, the March 2021 quarter marked the first where annual wage inflation hadn't slowed.
Unemployment in the year ahead
Ahead of the announcement, ASB chief economist Nick Tuffley confirmed the bank's forecast was for the unemployment rate to drop slightly, to 4.8 percent.
He said unemployment is likely to have peaked in the September 2020 quarter, when the official unemployment rate jumped from 4 percent to 5.3 percent.
"At this stage, that's probably the peak...the outlook we've got now is pretty flat for this year and a fairly gradual grinding down towards 4 percent by early 2023," Tuffley said.
With borders closed for much of the year, slow population growth is likely to mean the labour market will tighten, as skilled labour is filled from the current pool of domestic workers.
"We think that will help to contribute to unemployment and underutilsation trending downwards over time," Tuffley added.
Infometrics economist Brad Olsen said following COVID-19, there's momentum behind the labour market but still an underlying weakness in the economy. A small move in unemployment was expected, but the March 2021 quarter rate may not be the peak.
"We're picking that unemployment could peak at 5.5 percent later this year," Olsen said.
Jobseeker numbers softened over the last three months, but job growth numbers were tracking broadly sideways, he said. There were skill shortages, but other parts of the economy, such as tourism and transport still faced challenges. Further changes in business conditions are expected.
"We're wondering if the entire labour market (including the unemployment figure) is relatively volatile throughout 2021 - hopefully starting to get better as we move into 2022 and the economy continues to unlock," Olsen added.