Labour Sector Update: What’s Driving Hiring in NZ for 2025

New Zealand’s labour market is entering a phase of cautious recovery in 2025 following a prolonged period of instability. Job vacancies fell by 21.7% year-on-year in the March quarter, marking ten consecutive quarters of decline in job advertising. At the same time, job seeker activity has increased, indicating a tightening labour market with more applicants competing for fewer roles.

The unemployment rate edged up to 5.1% in March 2025 from 4.4% a year earlier. Despite this, there is growing optimism that the worst may be over. Wage growth has also moderated, averaging 2.9% across public and private sectors, aligning more closely with inflation at 2.5%. This softening follows a spike in wages during the COVID-19 era and suggests a return to more sustainable labour costs.

Job seeker confidence has declined since the beginning of the year, when 51% felt confident in finding employment. However, 2025 has brought a shift, with more employed individuals re-entering the market in search of better opportunities. On the employer side, confidence in securing talent has improved by 20%, although concerns remain over candidate quality and suitability. Replacement hiring is the leading recruitment driver, accounting for over half of all hiring activity, while 35% of new roles are tied to business growth—an encouraging 10% increase from the previous year. This indicates a renewed focus on expansion across industries. Despite ongoing talent challenges, nearly half of employers report strong confidence in achieving business goals in 2025.

"The New Zealand labour market is stabilising, but definitely not without its challenges."

Shannon Barlow, New Zealand Managing Director at Frog Recruitment, characterised the current market as being in "a phase of cautious recovery." She explained, "Job vacancies have dropped significantly, down twenty-one point seven percent year on year in the March quarter," signalling a continued decline in open roles. While vacancies are down, job seeker activity is up. "The number of applicants is climbing sharply," Barlow noted, reflecting increased market participation in a tighter employment environment. This trend aligns with the rise in unemployment to 5.1% and points to a competitive hiring landscape.

Wage growth has slowed, but this is seen as a correction rather than a warning sign. "This softening is more of a normalisation of labour costs than a cause for concern," Barlow clarified. With average wage growth still ahead of inflation, there remains room for cautious optimism.

Candidate behaviour has also shifted. "Many people in work throughout twenty twenty four chose to stay put due to the uncertainty," she said. But now, with signs of recovery, "we've started to see a more organic flow of candidates entering the market."

Employers, too, are gaining confidence. "Confidence in finding talent has risen twenty percent," Barlow shared, though the influx of applicants has brought its own complications. "High volumes of unsuitable applicants... still remain a challenge," particularly those without local working rights or adequate reliability.

On recruitment drivers, Barlow highlighted that "replacement hiring remains the biggest driver," responsible for over half of all activity. Encouragingly, "thirty-five percent of hiring is tied to business growth," marking a shift towards future planning and expansion.

Overall, the sentiment is shifting. "There really was that feeling of we must have bottomed out... let's get on with things and get back to business in twenty twenty five," she concluded. This mood is mirrored in employer sentiment, with nearly half feeling confident in achieving their business goals this year.

Tips for Employers Navigating a Stabilising Labour Market

• Reassess job advertising strategies to attract more suitable candidates.

• Leverage internal mobility and development programmes to reduce dependency on external hires.

• Be mindful of wage expectations, aligning offers with inflation trends while remaining competitive.

• Prepare for increased applications by enhancing screening processes.

• Focus on long-term growth plans by prioritising roles linked to business expansion.