Unemployment levels are at record lows, but a sharp rise in the jobless level is coming, with 6% unemployment possible by the end of next year as businesses defer hiring staff or replacing those leaving, ASB economist Jane Turner predicts.
Statistics New Zealand's quarterly household labour force survey results due out tomorrow will reflect rising unemployment and declining employment, with the ASB slightly more pessimistic than other analysts of the effects of the recession and credit crunch.
Unemployment hit a record low of 3.4% in December last year.
A poll of a dozen analysts expects employment to fall 0.6% compared with the ASB's 1% for the third quarter.
It predicts unemployment will rise from 3.9% to 4.4%, compared with analysts' expectations of 4.3%.
Ms Turner said with the economy having been in recession since the beginning of the year, a deterioration in the labour market would follow.
"Business confidence surveys point to falling employment intentions as profits have been hit by falling demand," she said yesterday.
The household survey, an estimate of the usually resident, non-institutionalised, civilian population of New Zealand aged over 15 years old, is considered a key indicator for trends.
ANZ chief economist Cameron Bagrie said the construction, retail (and distribution) and business services (including finance) sectors had provided two-thirds of the job growth during the past five years and were expected to be hit first.
While employment figures had been volatile during the past two years, the unemployment figure was a more consistent measure.
However, he highlighted there was a "wild card" in the data, in that businesses could shed staff quicker sand "more aggressively" than expected because of the turnaround during the past three to six months from reporting a "skills shortage" to "ample supply" of staff.
"Until now, businesses have been hoarding labour. But with sales down and costs up, they will be looking for increased productivity and gaining efficiencies,' Mr Bagrie said.
Ms Turner said the credit crunch had exacerbated the situation, having triggered more uncertainty.
Initially, the housing-related sector, retail and construction would experience a rise in unemployment, which was likely to be followed by cuts to jobs in the finance and insurance sectors, Ms Turner said.
She predicted a more broad-based fall in employment later next year "as companies cut back, firms are likely to be more circumspect on hiring decisions and replacement of departing staff".