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Businesses are hurting and have "run out of grit", the Employers and Manufacturers Association (EMA) says.
The official unemployment rate rose to 4.3 percent on Wednesday with economists predicting it would reach 5 percent by the end of the year.
The EMA's head of advocacy and strategy Alan McDonald said the number of businesses they'd had calls from for help with restructuring and making people redundant had doubled year-on-year in April.
"What they're telling us at the moment is they're still really hurting... They've just run out of grit I suppose and they're having to let people go very reluctantly.
"We are in the real bottom of the cycle, it's probably as tough as it was in the 90s, the last time we got this low."
Migration was also not helping because the skills coming in didn't match the demand, McDonald said.
Businesses were also concerned about the work-readiness of young people leaving education, he said.
Council of Trade Unions Craig Renney told Morning Report the government needed a plan to deal with unemployment.
"It's about understanding that each of these stories of job loss is a family, is a household, and because there's no plan, this is going to tip thousands of families into poverty."
Renney also pointed out that young people, aged under 25, Māori, Pasifika and women were more heavily represented among the unemployed.
"Unemployment for those aged 20-24 is now 9.8 percent, which is up from 6 percent a year ago.
"These groups are going to be the ones who clearly are bearing the burden of the cost of tackling inflation right now and are doing so without a plan to help them back into work, to give them some opportunities into work and to help grow the economy in a way that's actually going to deliver good jobs in the future."
Both men agreed it was time to reconsider the Reserve Bank's inflation target and the use of the Official Cash Rate to achieve it.
