Unemployment has risen above 5 percent, as job growth failed to keep up with those searching for work.
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Official figures show the unemployment rate stood at 5.2 percent, or 139,000 people, in the three months to December. That compares to a 4.9 percent jobless rate in the previous quarter.
"The December quarter saw a large number of people enter the labour force," Statistics New Zealand labour and income statistics manager Mark Gordon said.
"But while the number of people in employment has risen, so has the number of unemployed people."
The participation rate reached an all-time high of 70.5, but changes to the survey meant comparisons with past figures could not be made.
Employment grew 0.8 percent in the quarter, with 19,000 more people employed, while the number of people entering the workforce rose 1.1 percent to 29,000.
Full-time employment rose, while part-time work fell.
Auckland accounted for over half of the increase in all jobs, with more people employed in retail, accommodation and food services, followed closely by construction and professional services.
The underutilisation rate, which measures those wanting work or more hours, rose to 12.8 percent, or 354,900.
"Although employment has grown, the growth in wages has remained steady," Mr Gordon said.
Annual wage inflation held steady at 1 point 6 percent. It has been between 1.5 and 1.6 percent for the last seven quarters.
Inflation stands at 1.3 percent.
"Employment growth, at 0.8% for the quarter, was actually stronger than expected and is yet another indicator suggesting that economic momentum may be greater than we are forecasting," said BNZ head of market research Stephen Toplis.
"The combination of strong migration inflows and a high willingness to work continues to strongly boost the supply of workers," said ASB chief economist Nick Tuffley.
Unions have argued high levels of immigration was boosting unemployment and holding down wages.
"Growth in employment means nothing if many Kiwis still can't find good jobs. We support immigration, but it needs to be properly managed. Too much of it is in low wage, low skilled occupations," Council of Trade Unions president Richard Wagstaff said.
Average hourly wages increased 1.3 percent to $29.75 for the year, the lowest increase in six years.
Statistics New Zealand attributed the slowdown to more filled jobs in the lower-paid sectors of healthcare and social assistance, and accommodation and food services.
"Many of these are not only low paid but are ones in which the people who do that work are not respected for the skills they bring nor given the training and support they need," Mr Wagstaff said
"That is why women in the care industries are fighting for equal pay and better recognition of their skills."
