Official figures show the number of people out of work hit 105,000 at the end of December.
It is the first time in six years the number of unemployed has exceeded 100,000.
The Household Labour Force survey shows the number of unemployed rose from 4.2% of the workforce to 4.6% during the December quarter.
That is an increase of 10,000 or 10.8% during the quarter.
At the same time, employment increased quarter by 21,000 (0.9%) mainly due to an increase of 13,000 in male part-time employment.
Despite the rise in employment, total actual hours worked per week fell by 1.9% percent over the December quarter.
ANZ economist Philip Borkin says the increase in new jobs was offset by a record number of people in the workforce.
This may suggest that more people are having to find a second job, because of the challenging economic times, he says.
Westpac economist Dominic Stephens warns against reading too much into the big jump in jobs and the numbers looking for work.
Mr Stephens says in a recession more people give up looking for work than are forced back into the workforce and this will have the effect of pushing up the unemployment rate.
Job market changing - English
Finance Minister Bill English says the rise in unemployment is disappointing but it is something people will have to get used to.
Mr English says New Zealand has got used to low levels of unemployment but the job market is changing and forecasts are for unemployment to rise to 6% or 7% in the next couple of years.
He says though that is unfortunate, the Government is focusing on jobs and growth.
Mr English says a feature of the latest statistics is that the total number of those working has grown, which shows the resilience of people.