New Zealand's Unemployment Rate Highest Since 2015 — Update

By James Glynn

SYDNEY--New Zealand's unemployment rate rose to its highest level since September 2015 in the second quarter, highlighting the ongoing fragility of the economy amid ongoing price shocks from the war in the Middle East.

The unemployment rose to 5.6% in the second quarter from 5.4% in the first quarter, StatsNZ said Wednesday.

Economists had expected a rise in the jobless rate to 5.5%. The outcome also exceeded the expectations of the Reserve Bank of New Zealand.

Still, the central bank is likely to continue raising interest rates, according to some economists.

"Benign labor cost growth means there's one less inflation fire for the RBNZ to fight," said Wesley Tanuvasa, economist at ASB.

"But there's inflationary pressures elsewhere. Increased cost pressure from the Middle East conflict and the sensitivity of price-setters is something keeping the RBNZ up at night," he added.

With all five core inflation measures above the RBNZ's target midpoint and four increasing in the second quarter, ASB expects another three interest-rate increases by the end of 2026.

The RBNZ began raising interest rates earlier in July, increasing the official cash rate from 2.25% to 2.50%. The move was followed by a speech from Paul Conway, the bank's chief economist, who warned that firms appear eager to pass on rising costs quickly.

Annual inflation jumped to 4.1% in the second quarter, well up from 3.1% in the first quarter. That's more than twice the 2% midpoint of the RBNZ's target band.

Still, the pickup in price pressures across the economy in the second quarter wasn't particularly broad-based, with measures of core inflation still well behaved, according to some commentators.

The weak employment report might also point to the potential for a contraction in economic activity in the second quarter.

"They support our expectation of soft growth in activity over the quarter ... The second-quarter result will likely print negative," said Michael Gordon, senior economist at Westpac.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

August 04, 2026 20:01 ET (00:01 GMT)