Economists say the Reserve Bank could delay raising interest rates even further next year if the ongoing crisis in the eurozone goes unresolved and hurts the New Zealand economy.
The latest Household Labour Force Survey showed unemployment rose slightly to 6.6% in the three months to September, or 157,000 people out of work.
Employment rose just over 1%, though the number of people employed in Canterbury fell by 8%.
ASB economist Jane Turner says the underlying picture is encouraging despite the slight rise in jobless numbers.
She says much of the weakness is a result of the decline of jobs in Christchurch due to the earthquakes, which highlights the challenges that region faces.
But Ms Turner says if the rest of the country is considered, there are some very encouraging signs and there is quite strong growth in labour demand throughout the rest of the country.
She says the gradual recovery of the economy is on track, but the eurozone dramas raise the risk of further delays to monetary tightening.
Ms Turner says the European situation is causing a large amount of uncertainty for financial markets and decision makers.
She says uncertainty can lead to people holding off on hiring new people and putting new investment plans in place, which can weigh on activity in the near term.
OCR rise expected in March
Ms Turner says the expectation is that the Reserve Bank will increase the Official Cash Rate in March and the labour market data indicates there is still a gradual recovery in place.
But she says the eurozone will be the biggest factor in what the Reserve Bank does over the next year and it could lead to a later start and a much more gradual tightening cycle than previously expected.
