7 Nov 2008

NZ jobless rate expected to rise

7:04 pm on 7 November 2008

Rising unemployment and a fall in the numbers of people looking for work are expected next year, after figures show the unemployment rate hit its highest point in nearly five years.

Official figures issued on Thursday show the unemployment rate rose from 3.9% to 4.2% in the September quarter.

While 6,000 people lost their jobs during the September quarter, it was the 3,000 new jobs created amid the economic downturn that surprised economists.

BNZ economists say no new jobs were expected during the period, but also say four times that number need to be created to provide jobs to people entering the workforce.

Deutsche Bank economists believe a poor outlook for the world economy could see unemployment reach 7% next year.

BNZ economists predict unemployment to peak at 5.5%, but say that could be conservative if increased government spending and interest rate cuts fail to revive the housing market.

Westpac economist Dominick Stephens says the economy is likely to be hit by a new wave of problems from the end of this year.

However, he says New Zealand's labour market is more flexible than it was in the early 1990s, when unemployment rose above 10%.