Wellington  - New Zealand's Labour-led coalition government, which would seek re-election this year, moved into damage control mode Thursday after a survey showed unemployment rising and the number of workers falling.

The figures, coming after steady increases in the workforce throughout the decade, took analysts by surprise with Westpac Bank chief economist Brendan O'Donovan dubbing the fall of 29,000 jobs in the first quarter "an absolute shocker."

O'Donovan told the New Zealand Press Association that the only good news was that it might prompt the central bank to start cutting its benchmark interest rate, which has been at 8.25 per cent since July, sooner than predicted.

Statistics New Zealand's household labour force survey showed the seasonally adjusted number of people employed dropped by 1.3 per cent to 2.14 million in the quarter
- the biggest percentage decline in employment in 19 years.

The fall pushed the unemployment rate up from 3.4 per cent in the fourth quarter to 3.6 per cent.

Employment Minister Ruth Dyson quickly pointed out that the rate was still among the lowest ever recorded in New Zealand and it remained the sixth lowest in the
30-member Organization for Economic Cooperation and Development.

She issued a statement saying no other country in the group had kept its unemployment rate below 4 per cent for nearly four years and there were still more than 350,000 additional jobs in the economy than when Labour came to power in 1999.

But analysts said the figures showed that the economy was slowing very sharply, and Dyson said the government's budget due on May 22 would reflect "the seriousness of our economic challenges while continuing to plan for the strong future we all deserve." (dpa)