The number of hours worked fell in 2008 for the first time in 10 years, putting downward pressure on wages, which slowed to 3.3% growth during the year.
Statistics New Zealand figures issued on Monday show a 1.4% drop in the number of hours worked, while the growth in labour costs slowed from record levels in the final quarter of the year.
The Quarterly Employment Survey showed the fall in hours worked was most pronounced in part-time employment, where there was a 3.4% drop compared with a 0.2% decrease for those in fulltime jobs.
The drop in part-time employment was mainly in the property, business services and retail industries.
Hours worked by fulltime employees in the manufacturing, finance and insurance industries also fell.
The drop in the demand for labour is also showing up in wages.
The growth in the cost of labour, measured by Statistics New Zealand's Labour Cost Index, slowed from a record 3.6% in the September quarter to 3.3% in the final three months of last year.
Jump in unemployment rate predicted
Economists are predicting a big jump in the official unemployment rate this week after Monday's data confirmed that employers are cutting jobs.
They say the unemployment rate could vault from 4.2% in the September quarter to more than the 4.7% forecast for the December quarter.
Results of Thursday's Household Labour Force Survey results could show that up to 15,000 workers lost their jobs in the last three months of 2008.
An economist from ASB Bank is picking that up to 70,000 jobs will be lost during 2009, with employers cutting back positions to try to stay afloat in worsening economic conditions.