There are signs the fallout from the Middle East conflict is yet to reach Australia’s labour market as exclusive real-time data from Employment Hero’s Jobs Report reveals SMEs are hiring at their fastest pace in more than a year.
This comes after the Australian Bureau of Statistics revealed the March unemployment rate held steady at 4.3 per cent, with a rise of 53,000 new full-time jobs more than offsetting a 35,000 decline in part-time roles. Hours worked climbed 0.5 per cent.
Beneath the national figures, a more granular picture is emerging for SME employers. Employment Hero’s Jobs Report – drawn from anonymised payroll data across more than 300,000 businesses and 1.5 million employees – records the strongest SME employment growth in 13 months, hitting 6.9 per cent year-on-year. But economists warn the conditions underpinning this hiring surge may not last.
Middle East Shockwaves Are Yet To Hit Labour Force
One of the biggest uncertainties hanging over the Australian economy is the ongoing Iran conflict, via its potential to push up fuel costs, squeeze margins and eventually cool hiring. But economists say with confidence that no conclusions can be drawn from the March data. “This is far too early to detect any meaningful shift in broad labour market conditions in Australia that could be tied to the Middle East conflict,” says Westpac economist Ryan Wells. “This is because the labour market sits further downstream from price shocks, which take time to work through household spending to margins and decisions around investment and staffing.”
That does not mean the effects are invisible elsewhere. Westpac’s own spending data showed fuel expenditure already up 8.2 per cent, a cost pressure being felt most acutely by businesses with vehicle fleets, logistics operations or regional supply chains. The concern is that these price shocks will eventually feed into staffing decisions as margins tighten.
The Reserve Bank has forecast that unemployment is likely to edge higher in the second half of this year and reach 4.6 per cent in mid-2028. It has also signalled it may need to raise interest rates if inflation spikes further. For SME employers, these forecasts suggest that the hiring environment that feels relatively stable now may look materially different by the end of 2026.
Employment Growth In SMEs Remains Strong
While the unemployment rate captures a broad national picture through the ABS’s monthly survey, Employment Hero’s Jobs Report offers a ground-level view based on real payroll transactions processed across its platform.
The headline figure of 6.9 per cent year-on-year employment growth is a 13-month high and continues a trend that has seen growth ticking upwards since October. Month-on-month growth for March of 0.8 per cent in March suggests a rebound after a brief dip into negative growth, of -0.2 per cent, in January.
Casual roles grew at 9.2 per cent year-on-year, well ahead of full-time positions at 4.1 per cent and part-time roles at 2.9 per cent. The surge in casual hiring suggests many SME employers are keeping their options open amid global uncertainty, adding workforce capacity without committing to permanent headcount in an uncertain environment. The compliance demands of direct employment may also be a factor for employers favouring flexible employment.
At the same time, wages have started to flatline. SME wage growth has now been stable for four straight months, with the average hourly rate across the Employment Hero platform sitting at $45.50. Year-on-year wage growth of 4.6 per cent still outpaces the most recent ABS inflation figure of 3.7 per cent, meaning real wages remain in positive territory. But 4.6 per cent is the lowest annual wage growth figure recorded in the Jobs Report since July 2025.
For SME employers weighing up pay reviews or new-hire salary bands, this means the wage environment may be stabilising, but businesses in high-demand industries may still need to pay above average to attract the right candidates.
Construction And Professional Services Drive Demand
Not all sectors are growing at the same pace. Construction and trade services recorded employment growth of 10.0 per cent year-on-year and 2.0 per cent month-on-month, making it one of the strongest performing categories in the Jobs Report. With infrastructure pipelines and housing supply pressures continuing to generate demand, the sector’s appetite for labour shows few signs of slowing. Engineering was another standout at 15.4 per cent year-on-year, although from a smaller base.
Perhaps more notable for the broader SME community is the 6.1 per cent year-on-year growth in accounting, HR and legal services. One possible factor is that businesses are gearing up for upcoming regulatory changes, including Payday Super, which will require employers to pay superannuation at the same time as wages from July 1. Demand for compliance and advisory support often increases ahead of major legislative shifts, and this growth may partly reflect that preparation.
Only a handful of sectors are experiencing a jobs decline. Sales, marketing and media roles are down 1.2 per cent for March, while employment in Information and Communication Technology is 1.1 per cent lower for March and 6.5 per cent for the quarter.
Regional Gaps Widen As Employers Brace For A Shifting Second Half
State-level data reveals an uneven picture. Queensland posted employment growth of 0.9 per cent month-on-month, but wages in the state declined 0.7 per cent over the same period, a divergence that could indicate employers are adding headcount at lower pay points or bringing on more casual staff.
The Northern Territory showed signs of partial recovery, with employment rising 2.3 per cent month-on-month. That followed deep losses of 6.6 per cent year-on-year, meaning the territory still has significant ground to make up.
Tasmania had the sharpest decline, with growth declining by 2.1 per cent. That’s in contrast to a quarterly increase of 1.8 per cent.
Looking ahead, Westpac expects industries most exposed to the fuel price shock, including construction, manufacturing and transport, to feel the effects first if the Middle East conflict persists. The broader message from the March data is one of cautious optimism. SME employers who use this window to audit their workforce needs, assess wage competitiveness and plan for a potentially softer second half of 2026 may find themselves better positioned regardless of which way conditions move.
