The latest unemployment figures out today show a rise to 4.2% that may not relent over the next four quarters until it peaks at around 6.5% according to economists.

Although only a modest rise - and still at low levels both historically and compared to the rest of the OECD, the unemployment figures out today are an indicator of more to come following September’s global financial markets collapse.

Hiring intentions are set to slow down next year according to Council of Trade Unions economist Peter Conway, but depending on employers’ confidence in the labour market with regards to the looming stimulus from tax cuts, lower interest rates, and infrastructure spending, “Then hopefully they’ll say ‘well let’s hang on to workers for a bit longer”.

Salary and wage figures out recently show wages have been tracking CPI inflation, rather than growth however, which may compound pressures to lay off staff.

“We hope that wages can continue to rise. It’s noticeable that the 3.6% is still 1.5% below headline inflation for the same period. But it’s also noticeable that some of the settlements coming through that we hear anecdotally from unions do have smaller figures for 2009 than they do for 2008”, says Mr Conway.

Meanwhile BNZ chief economist Tony Alexander says the unemployment figures are old news really, being completely in line with expectations.

“We’re all just waiting now to see what 2009 is going to bring, the depth of 2009 – that’s where all our focus is, not what happened before it hit the fan over on Wall St... because the key thing of course is that this doesn’t capture any of the most recent credit crisis”, says Mr Alexander.

Mr Alexander is tipping negative employment results for probably each of the next four quarters, hitting a peak of around 6 to 6.5% as businesses look to protect their cash-flow and the economy gets hit by offshore weakness.

So with unemployment rising and wages growth easing off over the coming year, it won’t change the long term fundamental of strong wage growth further out, believes Mr Alexander, and warns the Reserve Bank will need to be fairly vigilant from late 2010-2011.

The coming fiscal stimulus will only mitigate the weakness in the economy at the edges, cautions Mr Alexander, and won’t offset it to any major degree.

Historically unemployment peaked at roughly 7.7% in the ’97-’98 recession, and was almost 11% in the recession of 1991, so the coming slowdown may give some younger people who’ve never experienced a recession a bit of a shock, as they’re more used to “being replete with job offers the past few years” says Mr Alexander, and “some of them may be a wee bit caught out and may have to adjust some of their spending relatively quickly”.

JP Morgan chief economist Stephen Walters says they expect the RBNZ to respond to rising joblessness and other signs of sustained economic weakness, “with aggressive interest rate cuts. We forecast an OCR of just 3.25% by the end of 2009. From a broader policy perspective, the winner of Saturday's general election, which the latest opinion poll results suggest will be the Opposition National Party, will face serious economic challenges, not least the drain on the Budget resulting from the rising jobless rate.”