Most commentators were forecasting unemployment to drop from 6.4% to 6.2%, or lower. Instead, the volatility of the household labour force survey continued.
Statistics New Zealand figures suggested the labour market had not yet moved back into a sustainable recovery.
If it were not for a decline in the labour force participation rate, the unemployment rate would have been higher.
The Council of Trade Unions called for the Reserve Bank to cut the official cash rate from 3% and some market commentators believed the central bank should hold the 3% rate all year instead of increasing it in September.
However, ANZ-National Bank economist Mark Smith still expected the OCR to be increased in June.
"The improving economic outlook is a reminder that the OCR cannot remain low indefinitely. We still expect a gradual series of policy tightenings to commence from June this year. The critical factor remains that we believe the economy is at an inflection point."
Recent readings from the household labour force survey had been something of a lottery and yesterday's data did not disappoint, he said.
There were quite different impressions depending on what commentators looked at.
The increase in aggregate unemployment was driven by a sharp 2.8% fall in part-time employment, which reversed a fall in September.
Full-time employment rose 0.3%, continuing the improvement seen since the start of last year.
More of the shake-out in the labour market had been in part-time employment with the level more than 4% below late 2008 peaks. By contrast, full-time employment was close to historical peaks, Mr Smith said.
Hours worked were also higher.
"Nothing flash, we admit, but it suggests the demand for labour is stronger than the total unemployment and employment figures infer. Average hours worked per person continue to trend higher, although they remain below historical averages."
There remained scope to meet increased labour demand by working the existing workforce longer rather than taking on new staff, he said.
Social Development, Employment and Youth Affairs Minister Paula Bennett put a brave face on the figures.
"Ideally, the rate would be dropping but it's not uncommon to see a rise in the rate at this time of the year. Last December quarter, it was 7.4%.
"The road to recovery is a bumpy one. Employers have boosted working hours before hiring new staff but they're indicating they'll take on more staff this year."
The slow recovery fitted the Government's focus on the economy, she said.
Green Party co-leader Metiria Turei said rising unemployment would hurt families who were already struggling and widen the gap further between the rich and poor.
"Today's unemployment figures show that those hit hardest by the recession are still experiencing it. The response by Prime Minister John Key's Government has been to raise GST, deliver tax cuts to those on the highest incomes and make it harder to access welfare support at the toughest times," she said.
The Otago unadjusted rate of unemployment was 5% in December but because it was unadjusted it is almost meaningless. In December 2009, it was 3.9%, rising to 6.3% in March before falling to 3.6% in September.
In December, the region had 119,600 people employed, 6400 out of work out of a working age population of 180,600. The participation rate rose to 69.7% but so did unemployment.
AT A GLANCE
• Unemployment rises to 6.8%.
• 158,000 people out of work.
• Participation rate falls to 67.9%
• Youth unemployment falls to 16.8%.
• Otago seasonally unadjusted unemployment 5%.
- dene.mackenzie@odt.co.nz.
- Twitter: @odtbiz
