"Unemployment is truly the laggard of economic indicators."
Over the five quarters to March 2009, New Zealand experienced a crushing recession with GDP falling a total of 3%.
But in all that time, the unemployment rate rose only 1.5%.
Mr O'Donovan expected something of a role reversal when the household labour force survey was released on Thursday.
He expected the unemployment rate to rise from 5% to 5.7%, the biggest single quarterly increase since 1991.
The reason unemployment rose so slowly in 2008 was New Zealand's pre-existing shortage of workers, he said.
As workers were laid off from weak industries, many were able to find work in not-so-weak industries that had been short of staff for years.
As the recession broadened and intensified, workers laid off in 2009 had not been so lucky.
Employment growth had become more volatile than ever and had developed a strong "spiky" pattern.
"The labour force participation rate has also become more volatile and has moved in lock-step with employment growth.
If we took this seriously, it would indicate that New Zealanders have spontaneously become wildly erratic in their decisions between paid employment and other activities."
However, it probably just meant a change in seasonal pattern, Mr O'Donovan said.
Westpac was predicting a participation rate of 68.3%, only down slightly after the sharp fall in participation rate last quarter.
Tomorrow, the labour cost index was expected to show that wage inflation was continuing to slow as unemployment rose and inflation abated.
Wage growth for all sectors, including overtime, slowed to 3.3% in March, down from a peak of 4%.
Mr O'Donovan expected a further slowing to 2.9% for June and by March next year, he expected annual wage growth to be just 1.7%.
The quarterly employment survey would also be released tomorrow and in contrast to the labour cost index, the survey measure of wages had not slowed at all in recent quarters.
The survey reported changes in average wages and was not adjusted for the composition of employment.
If low-wage workers were disproportionately losing their jobs, the average wage could increase.
However, the survey measure was expected to weaken substantially for the June quarter, he said.
Paid hours of work were also expected to have declined.
