One person told the Otago Daily Times they were forced to take a break from applying for jobs because their mental health was "rapidly declining".
It comes in the wake of the government cracking down on eligibility for Jobseeker Support payments.
Prime Minister Christopher Luxon last week told business leaders in Rotorua that unemployed school leavers needed to "get off the couch, stop playing PlayStation and go find a job".
Meanwhile, the unemployment rate rose 0.1% to 5.2%, or about 158,000 unemployed people, in the June quarter, according to Stats NZ.
Your People Recruitment managing director Warwick McArthur said the Dunedin-based employment agency had seen a "sharp decline" in permanent and temporary roles available over the past two years.
"In my opinion the job market has been tighter [for] longer than the GFC in 2008/2009."
Mr McArthur believed people were sticking with their current jobs and employers due to economic uncertainty.
They had historically seen a movement of staff, or "churn rate", of 10%, but this was now sitting at about 6%.
Businesses were reducing staff numbers and there were "far fewer" job opportunities, meaning a large number of applicants for available jobs.
It had recently advertised a part-time administration role and received more than 135 applications.
"Where traditionally we would receive 20 applications for a position, that number of applications has more than doubled."
Dunedin woman, Olivia Edmonds, said it was "exceptionally hard to find a job" in New Zealand.
"Honestly, it feels impossible sometimes.
"I have applied for so many roles. I am willing to learn, I am motivated, but it feels like that doesn't matter any more."
It was discouraging to see "entry-level" jobs asking for at least two years' experience, Ms Edmonds said.
She was trying to start somewhere, "but it feels like every door is locked before I even get to knock".
Experience was built after being given your first opportunity — something she wished more employers would remember, she said.
"Because in Dunedin, there's a saying everyone knows too well: ‘It's not what you know, it's who you know’.
"And for young people like me, that's the hardest part to change."
Dunedin 18-year-old Sophie said she had been applying for a new job over the past six months and had "no luck at all".
"I have probably applied for over 30 jobs and got an interview for one.
"I can’t even seem to get a simple job at fast-food restaurants like KFC, Taco Bell, Domino’s or Pizza Hut — even though I have five years working in customer service and [as a] kitchen hand."
It is not just young people who are finding the job market tough.
A source with previous experience in hiring, who the ODT has agreed not to name, singled out Oamaru’s job market as "absolutely horrible".
She had applied for "well over" 50 roles after returning from maternity leave, including three in a single week — none of which she heard back from.
The mental effect this could have on people was "astounding".
"I had to take a break from applying for jobs as my mental health was rapidly declining."
Having been responsible for hiring in two previous roles themselves, the source said "replying to every application is very simple and more than achievable."
Social Development and Employment Minister Louise Upston announced on Sunday young people aged 18 and 19 would soon no longer be eligible for Jobseeker payments if their parents could support them.
From November next year, those without dependent children would have to pass a "parental assistance test" to access Jobseeker Support or the equivalent Emergency Benefit.From October next year, young people participating in the Ministry of Social Development’s Community Job Coaching service could apply for a $1000 bonus payment "if they get a job and stay off the benefit for 12 months", Ms Upston said.
