Labour market, employment hits ‘flat patch’, says Deloitte

Deloitte’s recent employment forecast report has revealed a steady climb in Australia’s once persistently low unemployment rate, with clear indication that the sector breakdown of employment growth is shifting.

The November 2025 edition of Deloitte’s Employment Forecasts report highlighted that the market sector had done the most of the recent “heavy lifting”, which was the first time since December 2022.

According to David Rumbens, Deloitte Access Economics partner and report author, this was a stark reversal of the post-pandemic lead in non-market sector hiring, which drove more than 80 per cent of the employment gains in 2023 and 2024.

“Consequently, employment growth has slowed as the labour market hits a flat patch. Even with 42,000 people gaining work in the month of October 2025, job gains for the last six months have totalled just 81,500 workers, compared to 151,300 people finding work in the six months prior,” he said.

“This is a concerning trend and shows just how steep the slowdown in hiring has been for the labour market. When measured in annualised terms, employment growth in the six months to October 2025 was just 1.1 per cent, well below the annualised rate of 2.1 per cent in the six months prior.”

The report suggested the slowdown in non-market sector employment was likely a result of governments across Australia pursuing fiscal restraint.

It was noted that this would pose an ongoing risk to the labour market, however it would be a temporary setback as industries such as health care remained fundamentally strong and hiring was expected to rebound.

“However, the current labour market flat patch poses a conundrum for the RBA, which now faces the challenge of maintaining full employment and keeping the inflation rate within the two to three per cent sustainable band,” Rumbens said.

“With inflation once again outside of the target range, the macroeconomic landing is looking a little harder than first thought.”

It was predicted by the big four firm, in its report, that the Australian labour market would likely remain soft through the first part of 2026, before it picked up speed as the private sector economic recovery continued.

By broad worker classification, it was detailed in the report that the human services workforce was expected to grow by 2.6 per cent in 2025-26 and 1.6 per cent in 2026–27, which was set to be supported by health care and education and a jump in household spending.

In 2024–25, the white-collar workforce only grew by 0.8 per cent and was noted to be the slowest year for white collar jobs growth in a decade.

In 2025–26, white collar workforce growth is expected to nudge upwards to 0.9 per cent before 1.5 per cent in 2026–27 as stronger economic activity and hiring resumes.

The area predicted to decline in 2025–26 was the blue-collar workforce, as it would be impacted by a broader weakness across the industrial, agriculture, wholesale and administrative sectors, which was anticipated to constrain growth in the current financial year.

Rumbens noted the improvement in the labour market was contingent on the broader economic recovery.

“The Australian economy is likely to see a moderate acceleration over the coming quarters underpinned by ongoing real wage growth, earlier interest rate cuts and an uplift in private sector activity,” he said.

“This may provide some renewed labour market momentum through 2026.”

The report also anticipated a growth in employment across Australia’s CBDs over the next year, despite challenging conditions across the broader labour market.

“This recovery is anticipated to be underpinned by stronger consumer spending, higher credit demand and improving business profitability.”