A slowdown in hiring by Australian employers indicates the nation’s labour market is softening, but it might not be enough to convince the Reserve Bank there is enough slack in the economy to kill off the prospect of more rate hikes.
Analysts expect the unemployment rate to hold steady at 4.4 per cent in June figures set to be released by the Australian Bureau of Statistics on Thursday.
While the jobless rate has fallen from the post-pandemic peak of 4.5 per cent reached in April, the trend continues to be a gradual easing in the labour market.
That was replicated in job ads figures released by online employment marketplace SEEK.
Advertised roles fell 0.9 per cent in June and are now 5.8 per cent lower than 12 months prior.
The decline was driven by subdued hiring activity in the professional and public sectors, while a growing number of trades-based and technical roles recorded increased demand, said SEEK chief economist Blair Chapman.
“We are seeing a reallocation of hiring activity away from sectors that thrived in the post-pandemic rebound, and toward industries underpinned by long-term investment in infrastructure, resources and new build projects,” Dr Chapman said.
Westpac economist Ryan Wells said while the real-time relationship between partial indicators and the ABS survey was patchy at best, the nudge lower in job ads and softness in monthly business surveys gave little reason to expect a significant upside surprise on Thursday.
“More importantly, forward-looking business survey measures point to sluggish employment growth ahead,” he wrote in a research note.
“We remain comfortable with our view that slow employment growth will see a further rise in unemployment over the rest of the year.”
While business insolvencies declined 3.9 per cent in the 2025/26 financial year, trade payment defaults and ATO tax debts are rising again, according to CreditorWatch’s June Business Risk Index.
Together with continued pressure from elevated interest rates and fuel costs, Australian businesses would continue to face increasing financial stress, the credit reporting agency said.
How much the labour market weakens will play a significant role in whether the Reserve Bank decides to keep interest rates on hold again at 4.35 per cent or decides that more tightening is needed to keep inflation under control.
In minutes from the monetary policy board’s June meeting, members noted that while the unemployment rate was weaker than had previously been expected, other indicators such as the underemployment rate were still resilient.
With renewed conflict in the Middle East threatening to reignite oil prices and inflation, markets have slashed the odds of more rate hikes in 2026.
While market pricing implied the chance of an August rate hike at 25 per cent, one more rate rise before year-end was almost fully priced in, IG market analyst Tony Sycamore said.
If the labour force is stronger than consensus forecasts, expectations of another rate hike would strengthen further.
“A softer-than-expected result, particularly a rise in the jobless rate toward 4.6 per cent, would suggest the RBA has tightened enough,” Mr Sycamore said.
“Conversely, a strong jobs report would add to tightening risks.”
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