Australia’s labour market added just under 18,000 jobs in March, with the unemployment rate holding firm at 4.3%, according to the latest ABS Labour Force data.
The result came in below economists’ expectations for 25,000 new jobs and a slight easing in unemployment to 4.2%.
The data, which captures the early stages of the Middle East conflict involving Iran, showed little immediate impact on employment conditions, in line with expectations that geopolitical shocks take time to filter through the labour market.
Full-time employment rose by more than 50,000 positions, offset by a 35,000 decline in part-time roles, while the participation rate edged down to 66.8%.
Resilience masks emerging pressures
VanEck Head of Investments & Capital Markets Russel Chesler said the labour market remains “remarkably resilient”, with unemployment still near historically low levels.
“To put that in perspective, the unemployment rate was 6.2% a decade ago,” he said.
However, Chesler pointed to early warning signs, noting ANZ job ads fell 3.1% in March, although still above pre-COVID levels.
He warned that rising oil prices linked to the Middle East conflict could begin to weigh on employment in coming months.
“April employment numbers could present a very different picture as the impact of higher oil prices begins to flow through the economy,” Chesler said.
Fuel-sensitive sectors in focus
Chesler highlighted sectors with high fuel dependency as particularly exposed to cost pressures, including construction, farming, transport, logistics and manufacturing.
Construction, already facing elevated insolvency rates, was singled out as especially vulnerable due to its reliance on diesel.
Regional businesses are also expected to face increased pressure from rising transport costs.
Early signs of strain are emerging in aviation, with Qantas and Virgin already reducing flight capacity.
RBA rate path remains uncertain
Despite the softer-than-expected employment gain, analysts say the strength of the labour market continues to support the case for further monetary tightening.
Chesler noted markets are currently pricing in two to three additional rate hikes in 2026, which would lift the RBA cash rate to between 4.6% and 4.9%.
“In our view, this may be overly aggressive,” he said, warning the central bank faces a “difficult balancing act” between controlling inflation and avoiding a recession.
State Street Investment Management APAC economist Krishna Bhimavarapu said the data reinforces the likelihood of further tightening.
“Meaningful concerns over demand destruction would require the unemployment rate moving closer to 5%, so the RBA has bandwidth for more hikes,” he said.
“We continue seeing scope for at least two more this year.”
The upcoming March CPI print, due later in April ahead of the May RBA meeting, is expected to be a key driver of policy direction, with inflation potentially rising back into the mid-4% range.
Stagflation risks and investment positioning
Chesler warned Australia may be entering a stagflationary environment characterised by slowing growth and persistent inflation. He said investors should focus on companies with pricing power.
“Companies that can pass on higher costs to consumers and protect margins are crucial,” he said, highlighting Telstra and Transurban as examples.
Job market competition intensifies
JobAdder CEO Martin Herbst said the headline unemployment rate understates the level of competition in the labour market.
“Add in underemployment and you have a much larger pool of Australians actively competing for better work,” he said.
Herbst noted jobseekers face tighter hiring conditions and reduced salary leverage as real wages continue to decline.
For employers, he warned that while candidate flow has improved, competition for top talent remains strong.
“A slow or unclear hiring process will cost you,” he said, adding that companies need to offer compelling roles rather than relying on softer market conditions.