The number of New Zealanders looking for one hours work a week or more reached 168,000 in the December quarter, a rise of 0.8 per cent.
The greater than predicted rise has been put down to an increase of 14,500 people in the working age population.
"There are simply more people joining the workforce, which is outstripping job growth, says Social Development and Employment Minister Paula Bennett
"Net migration is part of this picture. New Zealanders are coming home and staying home, choosing to ride out a global recession in New Zealand."
Last quarter the number of those in work dropped by 2000, a marked improvement on the previous quarter which saw a decrease of 16,000 people in work.
Treasury and the Department of Labour had forecast unemployment to peak at 7 per cent early this year, before falling gradually.
"As most economists will tell you, employment almost always lags behind economic growth, but we're not out of the woods yet and every job that's lost has a significant impact on workers and their families."
"Having said that, New Zealand has fared better than many other countries. We are still well below the OECD average of 8.6 percent unemployment. It's clear the Government's focus on supporting thousands of jobs and helping New Zealanders find new jobs has helped," Ms Bennett says.
Work and Income's focus on job matching has meant about a third of those applying for a benefit over the last three months didn't end up needing one.
The number of job vacancies listed with Work and Income remains high and the Job Ops and Community Max schemes have had a significant impact on keeping young New Zealanders in work.
"Through Job Ops and Community Max, more than 5000 young people have found work. That's 5000 young people participating in the workforce and the community, instead of being on a benefit," says Ms Bennett.
The number of people receiving the Unemployment Benefit rose by 3%, last month to 68,369. The forecast for the end of January was 70,000.
The increase over the same period last year was 12%.
"This shows the rise in Unemployment Benefit numbers is slowing.
It's an indicator that we are nearing an inevitable turning point, but we still have a way to go before benefit numbers return to pre-recession levels," Social development and Employment Minister Paula Bennett, says.
The number of those who went off the Unemployment Benefit and into work last month was 3,851, the largest positive movement in the month of January since 2005.
"Clearly, this Government's work-first approach is having an effect, with Work and Income resolutely focussed on helping New Zealanders into work wherever possible," says Ms Bennett.