BCEC Monthly Labour Market Update – June 2026

• Surprise jump in employment keeps pressure on interest rates.
• Unemployment rate holds steady at 4.4 per cent.
• Participation up and workers seeking more hours in response to rising living costs.

Strong jobs growth casts doubt over labour market softening

A 76,300 surge in jobs in June has gone against recent signs of a softening Australian labour market. In seasonally adjusted terms, the result for June marked the largest monthly increase in employment since April of 2025 and the third largest in the past three years.

Employment growth was also broadly based. Strong growth was recorded in TAS (1.2%), WA (1.0%), and NSW (0.9%), with only QLD seeing a fall in job numbers (-0.1%). Employment increased for men and for women in both full-time and part-time positions.

June also saw 89,100 people move into the labour force, which kept the unemployment rate steady despite the jump in employment. Technically, the unemployment rate rose by 0.1 points, but rounding kept the headline rate unchanged from May at 4.4 per cent. The male unemployment rate dropped to 4.5 per cent after four consecutive months at 4.6 per cent, while the female unemployment rate rose 0.2ppt to 4.4 per cent.

For the Reserve Bank of Australia (RBA), the June figures mark the last update on the state of the labour market before the Monetary Policy Board meet in August. The strong jobs growth adds to the case for a further interest rise but, in our view, will have little weight in the RBA’s decision.

First, the Board are likely to look through a single month’s figures. Second, now we have data for the full June quarter, it is clear the labour market is softer than forecast in their last Statement on Monetary Policy. Annual employment growth to the quarter came in at 1.1 per cent compared to a forecast 1.3 per cent, and the unemployment rate averaged 4.4 per cent over the quarter compared to a forecast 4.2 per cent.

As noted last month, the June inflation figures to be released on 29th July will be critical to the RBA’s decision. Any further increase in underlying inflation will firmly increase the odds of a fourth rate rise in 2026. The jump in job numbers in June alone will have little bearing.

Labour supply response to rising living costs

The participation rate for both women (+0.4ppt) and men (+0.2ppt) increased in June, bringing the overall rate back to 67 per cent, a rate not seen since July of 2025. Of the 89,100 people who entered the labour market last month, around one-fifth of those can be attributed to an expanding working-age population, largely through immigration. The majority of entrants were those of working age who were not participating in the labour force in May, but either started working or looking for work in June.

June also saw underemployment rise for women and men. As shown in this month’s look at the ABS ‘u-series’ – a revamped set of measures of underemployment and underutilisation – this continues a substantial increase in labour underutilisation through 2026. There has been an increase in the proportion of people wanting to work and, among those in employment, an increase in the proportion who would like to work more hours than they currently do.

Understandably, there have been concerns about the impact of the US-Iran conflict and the associated shocks to oil prices on the labour market. With four months of labour force data since the conflict began in February, the impact has been quite muted. It can be seen clearly in the CPI data as inflation spiked, but it’s hard to discern any associated break in trends in either employment or vacancies.

Rather than reducing labour demand, the main impact seems to have been on labour supply. Rising prices will have effectively eroded real wages. Economic theory tells us there are two opposing effects of a fall in real wages. On the one hand people will want to work less, because they are paid less in real terms for every hour of work they do. On the other hand, they may want to work more in order maintain their overall income.

Households typically have pre-existing expenditure commitments, such as mortgage or other loan repayments, fees and rates, so the need to maintain income is likely to dominate in the short-term. However, uncertainty will also be playing a part. Concerns about future rate rises, prices at the petrol bowser, and possibly lay-offs if the economy cools, may be motivating people to work more and increase their savings.