Deutsche Bank expects unemployment to keep rising.
Chief economist Darren Gibbs expects it to reach 4.5% by the end of this year, heading into 5% next year.
Latest figures from Statistics New Zealand show unemployment rose to 3.9% in the three months to the end of June - the highest since March 2006.
Unemployment was 3.7% at the end of the March quarter.
Mr Gibbs also says he expects the Reserve Bank to steadily cut interest rates, with another quarter of a percentage point in the next meeting in September. The Official Cash Rate is now 8%.
Meanwhile, the household labour force survey shows the number of people in paid work rose by 26,000 in the June quarter.
Employment in the construction, retail, transport, education and financial services sectors rose during the quarter and fell in agriculture, forestry and fishing, and manufacturing.