It should be good news for all workers but inflation is throwing a spanner in the economic works.
The tight labour market is pushing wages up.
Wage inflation, as measured by the labour cost index (LCI) for all salary and wage rates, was 2.6 per cent in the year up to the December 2021 quarter.
But that, as many Kiwis will intuitively know, is not keeping up with the rate of inflation.
The consumer price index is running at more than twice that - 5.9 per cent.
"While the pace of wage growth has picked up over the last year, it hasn't really gone beyond a catch-up after little or no wage growth in the wake of the Covid shock in 2020," said Westpac chief economist Michael Gordon.
"Neither labour shortages nor demands for cost-of-living adjustments appear to have led to a widespread breakout in wage inflation yet."
So at least we aren't yet in a dreaded inflationary spiral - yet.
But most economists expect to see the labour market tighten further and wage growth - traditionally the laggard of economic trends - to follow.
That likely means more inflation and potentially more interest rate hikes.
"Unless the wheels abruptly fall off, it's looking like we'll see a further tightening over coming months –and could see the unemployment rate with a 2-handle in no time at all," said ANZ's Finn Robinson and Sharon Zollner.
"Labour demand is still well in excess of supply, and with the border remaining closed, there's no real prospect of a significant rise in labour supply just yet ... even when the border does open, there will be a queue to get out, as well as one to get in."
Today's data prompted ASB senior economist Mark Smith to up his outlook for interest rates.
"We've changed our OCR call in light of the tight labour market and high medium-term inflation outlook. A steady pace of 25 basis points hikes is expected each meeting, with the OCR now peaking at 2.75 per cent in early 2023."
The call highlights the good news/bad news nature of an economy running at or above capacity.
A real bright spot in today's data was the employment and wage growth kicking in for the younger demographic.
No one who lived through the high unemployment years of the 1990s - when unemployment hit 12 per cent - should take the benefits of a fully employed population for granted.
Low unemployment means more opportunity for school leavers and those at the bottom end of the socio-economic ladder. It generally means more social cohesion.
But, as KiwiBank's Jarrod Kerr says, "workers will expect compensation for the erosion in their real incomes – or jump ship."
"And herein lies a major risk for the RBNZ. As wages chase inflation higher, firms are pushed into rising prices further, a nasty wage-price spiral can take hold."
It presents a tricky dilemma for the central bank which needs to head off inflation but also to avoid a hard landing for the economy.
The potential for the New Zealand economy to self-correct is noted by Capital Economics' Ben Udy who goes against the consensus arguing that unemployment will start to rise again later this year.
"We think the strength in the labour market will fade in the second half of this year as rising interest rates and falling house prices weigh on employment growth.
We expect the unemployment rate to rise from 3.2 per cent now to 4.5 per cent by the end of next year."
On the plus side, that's still historically low. And there may yet be time for borders to open, and supply-chain led inflation pressure to ease.
As with so much right now, it's an outlook that hangs on the path of the pandemic.
