A surprise jump in the unemployment rate to 6.7 per cent for the March quarter adds weight to expectations that the Reserve Bank will hold official interest rates until March next year.

Some economists had expected the unemployment rate to stay steady or fall slightly to about 6.2 per cent, following a revised 6.4 per cent last quarter.

Total unemployment was up 9000 to 160,000 people.

All of the growth was in part time work with a slide in full time work, and total hours worked fell excluding the Canterbury region.

Westpac Bank economists said the figures were "unambiguously soft", with unemployment rising well above market and Reserve Bank expectations.

Employment growth was 0.4 per cent in the quarter, near market expectations, but mainly reflecting more jobs in Canterbury, with the rest of the country sluggish.

ASB Bank economists said the rise in unemployment reflected a big jump in the participation rate, to a near-record level at 68.8 per cent.

But the unemployment figures added to a picture of small negatives for inflation. As a result, ASB pushed out its forecast for the first Reserve Bank interest rate rise to March next year. It previously expected the central bank to move up in December.

'JOBS MASSACRE'

The First Union group, representing workers in textiles, wood and food processing, said manufacturing industries were facing a punishing high New Zealand dollar.

A "jobs massacre" had seen layoffs across the country, First said, with a recent wave of actual or potential job cuts in the sectors it covers, including almost 100 jobs at carpet and yarn mills in Auckland, Whanganui and Oamaru.

A port processing plant in Hamilton was laying off 20 staff this week.

"Industries like textiles and wood should be filling export orders, firing up to meet the needs of the Canterbury rebuild and creating jobs, but the opposite is happening, as the Government sits on its hands without any plan for jobs," First general secretary Robert Reid said.

Regionally, Manawatu and Wanganui have been hard hit by a big jump in unemployment to almost 9 per cent, while the rate in Wellington fell sharply in the March quarter to 6.1 per cent.

Quarterly regional figures can bounce around quite sharply, with the overall national figures seen as a better guide to the state of the job market.

However, in Manawatu-Wanganui, the unemployment rate rose from 6.2 per cent in the December quarter to 8.9 per cent in the March quarter, slightly worse than the Northland region which typically suffers from high unemployment.

For Manawatu/Wanganui, the number of unemployed jumped from 7700 in the December quarter to almost 11,000 in the March quarter - a rise of more than 3000 people as job numbers fell.

In the Wellington region, the unemployment rate spiked up to 7.2 per cent in the December quarter last year, but fell back to 6.1 per cent in the last three month period, despite government job cut backs.

There were about 3900 fewer unemployed in the Wellington region, but that reflected a rise in people not looking for work, rather than a jump in actual job numbers.

The other region to take a hit was Gisborne/Hawke's Bay, where unemployment rose from 7 per cent at the end of last year to 8.5 per cent in the March quarter.

The unemployment rate in Auckland rose from 6.7 per cent in the December quarter to 7.9 per cent in the March quarter, in line with where it was a year earlier.

MORE WOMEN UNEMPLOYED

Some economists had expected the national unemployment rate to stay steady or fall slightly to about 6.2 per cent.

Earlier figures put the December quarter unemployment rate at 6.3 per cent, but that was revised up in latest figures to 6.4 per cent.

Statistics NZ figures showed 9000 more unemployed in the March quarter, despite 9000 more people gaining employment in the period. That reflected an 18,000 rise in the total labour force during the three months.

Part time workers jumped 2.5 per cent in the quarter, while full timers fell 0.2 per cent.

The rise in unemployment reflected more women in unemployment, while no more men were unemployed, Statistics NZ said.

The Green Party said National's 2011 Budget forecast employment growth of 36,000 in the year to March 2012 but the latest figures showed that only an additional 20,000 jobs were created.

"On the eve of National's next Budget, we learn that they have failed to achieve one of the pivotal promises they made last Budget," co-leader Metiria Turei said.

"Kiwi families are fast learning not to rely on the promises of [Prime Minister] John Key and [Finance Minister] Bill English."

Joblessness rose by 12,000, nearly 1000 per week.

"The sharp increase in unemployment shows the economic policies of this Government are failing to create jobs for New Zealanders," said Turei.

"A good first step would be maintaining control of our electricity generating state owned assets that will provide jobs and employment for thousands of New Zealanders.

"We should also be investing in procurement policies that keep jobs in New Zealand.

"Unfortunately the upcoming zero Budget is likely see an increase in unemployment and lead to more hardship and inequality in New Zealand."

But employment minister Steven Joyce insisted there had been "gradual steady" growth in the number of jobs, despite the rise in unemployment.

The increase of 9000 new jobs in the quarter resulted in the highest labour force participation rate in three years.

"These figures continue to reflect a challenging job market as the country continues to deal with the impact of the global financial crisis and Canterbury earthquakes," Joyce said .

"Despite these challenges, over the past year 20,000 jobs have been created and the number on the unemployment benefit has fallen by 6500."

The Government's business growth agenda was focused on providing opportunities for competitive businesses to establish and grow to create more jobs and higher wages.

"Nothing creates sustainable jobs and boosts our standard of living better than business confidence and growth."

Labour MPs David Parker and David Cunliffe said the rise in unemployed confirmed the Government had botched its management of the economy.



"Rising unemployment is joining the list of examples of this Government's economic policy failures - along with a worsening current account deficit, growing international debt, and a growing wage gap with Australia," said Parker.



"That's why we will have another near-zero Budget this month and it's why unemployment is going up when it should be recovering. Selling assets, selling farms and selling legislation is not a solution."



Cunliffe said National clearly did not have a workable plan for jobs and growth.



"Poorly executed economic development is a recipe for a longer, deeper recession and growing social misery.