Hiring in a Harder Market: What Needs to Change in 2026

Australia’s employment market is shifting fast. And if you’re heading into 2026 with the same hiring strategy you used two years ago, you’re already behind.

Yes, the talent is still out there. But it’s harder to find, harder to attract, and harder to retain. The conditions have changed, and so must your approach.

As of late 2025, here’s what we know:

• The unemployment rate is rising

• Job vacancies are falling

• Applications are increasing, but not always the right ones

• Employer confidence is mixed

• Wage growth remains modest, but steady

  
  

On paper, this creates a paradox: more people looking for work, but greater difficulty making the right hire. So what’s going on? And more importantly: what should business leaders and hiring managers do differently in 2026?

Let’s take a closer look at the forces at play, and what needs to shift to meet them.

1. Unemployment Is Rising, But So Is Total Employment

Australia’s seasonally adjusted unemployment rate rose to 4.5% in September 2025, the highest since November 2021 (Australian Bureau of Statistics).

And yet, in October 2025, national employment hit a new high: 14.683 million (seasonally adjusted) and 14.678 million (trend terms) (ABS, Trading Economics).

What does this tell us?

The market is in motion, not collapse. We’re not seeing mass layoffs or workforce contraction, we’re seeing adjustment. Restructuring. A recalibration of roles, requirements, and expectations.

For hiring managers, this means you may have access to more candidates, but you’ll need greater precision in identifying relevance, readiness, and fit.

2. Labour Force Participation Is Steady, But Vacancies Are Shrinking

Labour force participation has held firm at 67.0% in both September and October 2025 (Australian Bureau of Statistics).

Australians are still highly engaged in the workforce. But total job vacancies fell to 327,200 in August 2025, down 2.7% from May (ABS).

Private-sector vacancies sat at ~288,700, down ~3.4%, while public-sector vacancies increased slightly to ~38,400 (ABS).

This tightening supply of roles means greater competition for each opening, and more noise in your recruitment process.

Many businesses are now facing a flood of applications that don’t match the brief. The signal-to-noise ratio has dropped, and so has the speed and confidence of hiring decisions.

2026 takeaway: 

To navigate this, you need to get sharper in your job design, your briefing process, and your filtering systems. Generic ads will only bring generic (and often irrelevant) applicants. Specificity is your best friend.

3. More Candidates Per Job, But Not Always the Right Fit

Australia’s job market is now sitting at a ratio of 1.9 to 2.0 unemployed people per job vacancy (AI Group, Reserve Bank of Australia).

While that compares favourably to the pre-pandemic average of ~4.0, the increased volume hasn’t led to greater alignment.

You might think this would make hiring easier. But that’s not what employers are saying.

Why?

Because more applicants doesn’t equal better applicants.

We’re seeing a growing gap between the jobs available and the skillsets in market. And that leads to frustration on both sides, long shortlists, extended timelines, and increased pressure on internal teams.

2026 takeaway: 

It’s time to stop chasing volume and start investing in clarity. Job briefs need to speak directly to the talent you want, not just to "the market." Recruitment partners must know your business, your standards, and your cultural context inside out.

The old spray-and-pray approach to talent simply doesn’t work anymore.

4. Recruitment Confidence Is Mixed and Misalignment Persists

Although exact recruitment rate figures are hard to pinpoint nationally, it’s clear that many hiring managers are struggling to fill roles efficiently.

Across the board, we’re seeing:

• Misalignment between applications and role requirements

• Extended recruitment timelines

• Growing frustration with irrelevant applications, particularly in metro markets like NSW and Victoria

This isn’t about effort, it’s about fit. And fit starts long before the interview stage. It begins with the brief. The positioning. The understanding of what’s really required.

2026 takeaway: 

Relevance must become your north star. It’s time to stop measuring recruitment success by "number of interviews" or "pipeline size" and start measuring by alignment, fit, and business impact.

A great hire doesn't come from speed, it comes from accuracy. And accuracy requires a partner who truly understands the performance context you're hiring into.

5. Wage Growth Is Modest, But So Is Confidence

While we don’t have exact wage growth and inflation numbers for the full year yet, the trend is clear:

• Wage growth remains modest, generally just above 3%

• Inflation is easing, sitting around 2.4% as of mid-2025

• Real wage growth is finally gaining traction

(Australian Institute of Health and Welfare, AIHW)

However, this hasn’t translated to full confidence in the hiring space.

Employers remain cautious, not because the talent doesn’t exist, but because it’s harder to find the right fit at the right time.

2026 takeaway: 

To build confidence in your hiring decisions, you need a tighter bridge between your strategic goals and your recruitment outcomes.

That means:

• Revisiting how you define success in a role

• Looking beyond technical fit to cultural and leadership alignment

• Building talent pipelines well in advance of need

• Partnering with recruiters who understand the roles because they’ve lived them

So… What Needs to Change?

If the market has shifted, so must your hiring approach.

Here’s what 2026 will demand from high-performing businesses and leaders:

1. Sharpened Role Definition Be crystal clear on what success looks like in each role. Avoid laundry lists. Focus on outcomes.

2. Tighter Talent Alignment Seek depth over breadth. Prioritise capability, coachability, and cultural fit, not just résumé keywords.

3. Greater Precision in Partnering Work with recruitment partners who truly get your business, your market, and your performance expectations.

4. A Stronger Employer Value Proposition In a competitive landscape, top talent is choosing you as much as you’re choosing them. What’s your edge?

5. A More Human-Centric Process Remember: behind every CV is a person navigating a tough market. The way you engage with candidates says a lot about your brand, even if they don’t get the job.

Final Thought

There’s no question 2026 will bring new challenges. But within those challenges is an opportunity: to get smarter, sharper, and more intentional with how you build your teams.

In a harder market, clarity becomes your competitive advantage. And great hiring becomes not just a process, but a performance edge.