Labour market remains sluggish as unemployment jumps

The recent labour market data has given the recruitment industry plenty to be concerned about.

If the July results, released on 14 August, follow the trend of May and June, then there would be serious doubts that the 2026 financial year will deliver better news for agency owners and leaders, bruised by the underwhelming 2024 and 2025 results.

According to the June labour market update, released by the ABS last Thursday, the unemployment rate rose to 4.3 per cent, in seasonally adjusted terms. This is the highest unemployment rate since November 2021.

Employment increased by only 2,000 after a 2,600 decline in May, a significant change in momentum from the robust job growth of 87,600 in April.

The participation rate increased by 0.1 percentage points month-on-month, to 67.1 per cent in June.

Most concerning was the decline of 38,200 in full-time employment to 10.06 million, while part-time employment increased by 40,200 to 4.56 million.

The June update of JSA’s Recruitment Experiences and Outlook Survey reported that hiring rates and recruitment difficulty both dropped last month, although job ads were up.

The recruitment rate was 44% in June 6 percentage points lower than last month, with the decline most pronounced for businesses with 20 or more employees, dropping from 79% in May to 69% in June.

The recruitment difficulty rate also declined by 6 percentage points to 44% of recruiting employers in June. Over the past year, the smoothed recruitment difficulty rate in Capital Cities has decreased by 11 percentage points, while the rate in Rest of State areas has dropped by 10 percentage points.

The proportion of recruiting employers who were unable to fill their vacancies within a month rose in June by 2 percentage points to 39% of recruiting employers.

Good news was scarce; however, there was no change in the hiring plans of employers, with the proportion of employers expecting to increase their staffing numbers in the next three months remaining unchanged at 19% in June, one point higher compared to June 2024.

Other good news was online job ads rising 1.9% in seasonally adjusted terms in June, according to the latest Internet Vacancy Index. Ads increased across all major occupation groups, with Technicians and Trades Workers at 3.2% experiencing the largest lift. Growth was also seen across all skill levels and in all states and territories except the ACT.

Compared to June 2024 job ads were down 6.7% nationally, with capital cities experiencing a slightly greater decline compared to regional areas.

Innes Willox, chief executive of the Australian Industry Group (Ai Group), identified weak private sector hiring as a problem for the economy, in a media statement issued last week.

“This unfortunate outcome is a consequence of our weak private sector labour market. For over a year, there has been negligible jobs growth in the private market sector, with government-supported employment in the public and non-market sectors doing the heavy lifting.”

According to Willox, over the past year and a half, job creation has been far too reliant on government-supported sectors.

“During 2024, approximately four in five new jobs created in Australia were in these government-supported sectors. As the Australian Industry Group has been warning since the start of this year, this level of dependence on the taxpayer for job creation is plainly unsustainable,” he said.

“With the private market sector accounting for two-thirds of employment in Australia, it was inevitable that its sustained weakness would eventually spill over to the broader labour market. It appears this problem is now coming home to roost.”

In the four months spanning April to July last year, seasonally adjusted employment grew by 186,600. Employment growth from April to June this year is just 87,000, meaning July needs to deliver 99,400 additional jobs just to match the same four months in 2024. That seems highly unlikely.

At APSCo Emerge, Westpc economist Sian Fenner didn’t give us much reason to be optimistic about the rest of 2025, noting hours per employee were down 1% month-on-month, consumer confidence was sluggish and private sector investors remained cautious.

The prospect of more interest rate cuts was the one silver lining, with Fenner expecting inflation to abate, causing the RBA to reduce interest rates below 3 per cent in 2026.

It certainly doesn’t look like 2025 is going to finish any better than 2024.