Wages Stumble and Hours Plunge as New Zealand Job Market Hits a Slowdown

Despite ongoing job growth, new data reveals a softening New Zealand labour market, with falling hours and stalling wage momentum pointing to more cautious business behaviour.

New Zealand’s labour market is still growing, but only just. According to August jobs data from Employment Hero, the number of employees is up 2.6% year-on-year. That sounds strong, until you look under the hood. Quarterly gains have cooled to 1.6%, and monthly employment growth has slipped to just 1.1%.

It’s a shift that points to growing caution from SMEs as the economic outlook darkens. While jobs are still being added, they’re arriving with far less intensity. And when you pair that with what’s happening to wages and working hours, the message becomes clear: businesses are bracing.

Wages stall as cost pressures mount

Wage growth is one of the clearest indicators of employer confidence. In August, median wages were up 4.7% compared to a year earlier, still ahead of inflation, but the monthly story tells a very different tale. Month-on-month, wages dropped 1.1%. Over the quarter, they barely moved, inching up just 0.1%.

That flatlining is a warning sign. Employers are hitting pause on pay increases, likely feeling the squeeze from ongoing cost pressures. Whether it’s the rising cost of goods, energy or interest rates, businesses seem to be tightening their belts.

Hours worked drop across the board

More concerning still is the fall in average working hours, a reliable leading indicator of labour demand. Hours are down across all timeframes: 0.6% lower than this time last year, 1.2% lower than last quarter and down 1.3% since last month.

In plain terms, businesses are asking employees to work fewer hours. That could reflect reduced demand, seasonal shifts or strategic cost-saving decisions. Either way, it’s a sign the job market’s engine is starting to cool, even if jobs themselves aren’t being cut.

A tale of two islands

Digging deeper, the report reveals a growing regional divide. While the South Island saw a modest 0.6% year-on-year lift in hours worked, the North Island didn’t fare as well, with declines dominating.

That split reflects broader sectoral differences. The South Island’s economy leans heavily on agriculture and manufacturing, industries that have remained more resilient. Meanwhile, the service-driven urban centres of the North Island appear to be feeling the pinch more acutely.

Budget season looms large

These latest figures land just weeks out from the government’s next budget, and they’ll no doubt sharpen the focus on productivity and business support. With wages stalling and hours falling, employers are looking for certainty, something that’s been in short supply.

There’s growing pressure on policymakers to deliver measures that address rising input costs and support SME resilience. Without it, we risk a compounding effect: businesses becoming more conservative, slowing economic momentum even further.

What it means for employers and employees

For employers, the message is mixed. Hiring is still happening, but it’s slowing. Wages are drifting sideways. And hours are on the decline. That paints a picture of a cautious, more defensive stance in workforce planning.

For employees, particularly those hoping for pay rises or more hours, it could mean a more competitive environment. With fewer shifts on offer and employers tightening payroll, the bar for progression may rise.

The bottom line

The New Zealand job market isn’t collapsing. But it is shifting and not in a direction that inspires confidence. For now, employers are holding on to staff, but doing so with tighter budgets and shorter rosters. The next few months will be critical. If conditions continue to soften, we may see a pivot from cautious optimism to more visible retrenchment.