Australia’s labour market showed signs of weakening in July 2026, with employment falling by 15,800 jobs after two strong months of growth that added more than 118,000 positions. The unemployment rate increased slightly to 4.5%, while the participation rate eased to 66.9%. More notably, hours worked declined faster than employment, suggesting underlying labour market conditions are softening.
The decline in employment was driven entirely by part-time jobs, which fell by 32,200, while full-time employment rose by 16,300. Despite the monthly setback, the labour market has remained relatively resilient over the past year, adding around 191,900 jobs, equivalent to annual employment growth of 1.3%.
Trend data also indicates that employment growth remains positive, with around 29,000 jobs added per month and a three-month average of 34,000. This suggests that the broader labour market has not yet experienced a sharp deterioration, even though short-term conditions have weakened.
However, forward-looking indicators point to increasing caution among employers. The NAB Business Survey showed the largest decline in year-ahead employment expectations since the pandemic, indicating businesses are becoming more hesitant to hire. While it is too early to determine whether July marks the beginning of a sustained slowdown, the risks to the labour market are increasingly tilted toward weaker employment growth in the months ahead.
