The unemployment rate rose to a nine-year high 6.5 percent in the September quarter, from 6 percent in the previous three months.
The number of people unemployed reached its highest level in 15 years, rising 12,000 or 9 percent during the September quarter to reach 150,000.
The rise in the unemployment rate was slightly above expectations, with the median forecast in a Reuters poll of economists having been for a rise to 6.4 percent.
Better employment figures are expected to lag any return to growth in the wider economy, with figures released in September showing gross domestic product edged up 0.1 percent in the June quarter, following five quarters of contraction.
At that time Statistics New Zealand (SNZ) warned the growth was so small it could not be seen as a sign of economic recovery.
Along with the unemployment rate, the Household Labour Force Survey released today by SNZ also showed seasonally adjusted employment falling 0.8 percent, worse than the 0.3 percent median fall prediction.
The seasonally adjusted labour force participation rate was 68 percent, down 0.4 percentage points from the June quarter.
The unemployment rate has been rising from a low of 3.5 percent in the December 2007 quarter.
ASB chief economist Nick Tuffley said employment was softer than tentative signs of stabilisation implied by business surveys.
He expected employment to roughly stabilise in the December quarter, and start to pick up in the first quarter of next year.
ANZ-National Bank senior economist Khoon Goh said that while the economy might be expanding again, labour demand remained "pretty weak".
"Given the usual lags between employment and economic activity we can expect the unemployment rate to continue rising from here," he said.
Overall, the data reinforced the Reserve Bank's stance of leaving interest rates on hold until the second half of next year.
Deutsche Bank chief economist Darren Gibbs said the good news was that forward-looking indicators were much improved over recent months.
The economy was on course for an unemployment rate that would stabilise around 7 percent, before declining from the middle of next year, he said.
SNZ said the rise in unemployment was largely driven by male unemployment, which rose by 9000.
The 17,000 decline in employment to 2.15 million was driven by a fall in male full time employment. That decrease was partly offset by an increase in female employment during the quarter.
The number of people employed is at its lowest level since December 2006.
Male full time employment fell 14,000 or 1.3 percent, while male part time employment was down 6000 or 4.3 percent.
Female full time employment rose 2000 or 0.3 percent, while female part time employment lifted by 1000, also 0.3 percent.
The total number of actual hours worked fell 0.7 percent during the quarter, SNZ said.
The working age population, which is not adjusted, lifted 11,800 or 0.3 percent to 3.38m, partly due to migration gains.
Those underemployed -- who work part time and would prefer more hours -- rose to 24.4 percent of part time workers in the September quarter, from 22.2 percent in the June quarter and 16.5 percent in the September 2008 quarter.
For the year to the September quarter, the number of people employed was down 1.8 percent.
Male employment was down 25,000 or 2.1 percent for the year, driven by a 30,000 or 2.9 percent fall in full time employment.
Annually, female employment dropped 14,000 or 1.4 percent, with full time employment down 12,000 or 1.8 percent.
In unadjusted terms, employment for those aged 15-19 fell by 22,700 to 116,500 in the year to September. For those aged 60-64 employment rose by 13,100 to 192,600, while for the 65-plus group it was up 6600 to 81,800.
Waikato was the only region to show a significant, unadjusted annual fall in the number of people employed, down 17,300 to 192,600. Otago had an annual rise of 9500 to reach 102,700 people employed.
The increase over the year in the number of people unemployed was 53.9 percent of 53,000 people, the largest annual percentage rise on record.
