The Westpac McDermott Miller employment confidence index fell eight points to 120.8 in the June quarter, the largest quarterly decline since the survey began in 2004.
However, employment confidence remained firmly in optimistic territory, Westpac economist Donna Purdue said.
An index above 100 indicated more optimists than pessimists.
A number below 100 indicated that pessimists outnumbered optimists.
"The tight labour market has been one of the key pillars of the New Zealand economy in recent years, providing critical support to the consumer as interest rates have risen, the housing market has toppled over and the cost of living has ballooned.
"Today's survey results suggest that even the labour market has become vulnerable to the economic downturn."
Most respondents to the survey believed the weakness would be mainly reflected in reduced job opportunities rather than lower earnings.
All regions reported a fall in confidence in the quarter with the exception of Canterbury and Southland, where the indices were largely unchanged.
Otago fell to 121.8 in June from 126.2 in March.
In June last year, the index was 126.1.
Southland rose slightly to 127.8 from 127.7 and Canterbury rose to 131.5 from 131.
Ms Purdue said the detail of the survey reinforced Westpac's view that it would be mainly employment growth that responded to economic weakness over the coming year while wage growth would remain robust.
The Reserve Bank last month forecast wage growth to slow from 2009 on the assumption that the reduced demand for labour would moderate wage demands.
"It remains to be seen how much wage growth will slow in a period of substantial cost-push inflation," she said.
"The results of today's survey show few signs that earnings expectations are being pared back, despite a clear recognition that the demand for labour will moderate."
