The demand for workers is continuing to decline, as the number of paid hours people worked in the year to March suffered its biggest fall since the recession of the early 1990s.
The Quarterly Employment Survey shows 1.9% fewer hours were worked over the year, the biggest annual fall in 17 years.
The number of hours worked - not including those by the self-employed - has now fallen for three consecutive quarters as firms cut back to stave off the worst effects of the recession.
There were 13,000 fewer fulltime jobs, according to the latest figures from Statistics New Zealand.
The largest falls were in construction, which suffered a 1.8% fall in the number of hours worked, and manufacturing which was down 10.3%, Statistics New Zealand figures show.
The number of people in full time work fell 1.1% in the first three months of this year compared with a 0.4% increase in the final three months of 2008.
BNZ economists say the fall points to the economy contracting at least as much in the first three months of the year as in the final quarter of last year.
Data to be released later in the week is expected to confirm the decline in the labour market.
Economists predict the Household Labour Force survey on Thursday to show the jobless rate rising from 4.6% to 5.3% in the first three months of the year, an increase of about 17,000 people from December.
Data will also be released on the growth in wage rates.
Meanwhile, the Treasury says the New Zealand economy shrank by 1% in the first three months of this year - a bigger contraction than for any other time during the current recession.
In the final three months of 2008, the economy contracted 0.9%. The Treasury blames falls in household spending, business investment and exports.
The Council of Trade Unions says the Budget on 28 May needs to focus on job creation.
Union secretary Peter Conway says he expects the Household Labour Force Survey on Thursday to confirm that the scale of unemployment is growing. He says the figures clearly show action needs to be taken.
Situation could be worse - Business NZ
Business New Zealand chief executive Phil O'Reilly said on Monday the figures are ugly, but they could be worse.
Mr O'Reilly told Checkpoint New Zealand's economy is in better shape than others - and that offers hope for difficult times ahead.
"In terms of the upturn that New Zealand will get, I hope that will be quicker and sharper than many other economies because of the nature of our country.
"Now, none of that is good news for those impacted today and over the next year or so, but from an economy-wide perspective, it could be a lot worse."
Mr O'Reilly said it is important to focus on New Zealand's situation rather than what is happening elsewhere in the world.
