Cracks are forming in the once-hot Australian job market, with workers staying in their roles despite pay increases not covering rising cost of living. In a grim sign for jobseekers, Commonwealth Bank’s latest wages and labour data points to a cooling jobs market.According to Commonwealth Bank economist Harry Ottley, the “quits rate” – which measures the share of workers who voluntarily leave their jobs – continues to fall from its peak in 2022. “Overall, the data supports our broader view that the labour market continues to loosen gradually but remains a little too tight for comfort for the RBA,” he said. Mr Ottley warns workers the jobs market is only predicted to worsen for the rest of 2026.“From here, we expect the unemployment rate to drift higher and the labour market to move closer to balance over the coming years, assisting in bringing inflation back to target over time,” he said. The research follows RBA chief economist Sarah Hunter’s midweek comments that future interest rate decisions will be heavily determined by whether households believe inflation will hang around for a period to come.“When people have these backward-looking expectations, looking through supply shocks might be less optimal, as we may need some period of low inflation and higher unemployment to bring expectations back down if they start drifting up,” Ms Hunter said.Post the Covid-19 lockdowns, Australia’s unemployment rate fell to a historic low of 3.5 per cent, which hurt the country in terms of inflation.“Coming out of the pandemic, unemployment fell to very low levels which contributed to a sharp pick up in inflation,” Ms Hunter said.Australia’s unemployment rate has since ticked up over the last three years, coming in at 4.4 per cent in May, down from 4.5 per cent in April.April’s figure was the highest unemployment rate since 2021.Australia’s jobs market remains comparatively strong compared with the rest of the world, with the OECD average unemployment rate at 4.9 per cent. Adding to pressures for households, Commonwealth Bank data points to a below inflation pay bump for households. This means households’ spending power has technically gone backwards.Wages increased by 0.8 per cent over the three months to June, while annual wage growth held steady at 3.1 per cent over the year, indicating that higher inflation has not translated to stronger wages growth.Mr Ottley said there could be light at the end of the tunnel for cash-strapped workers. “The next few months will be important to watch. The increase in minimum and Award wages of 4.75 per cent will likely see Q3 wages pressure pick up,” he said.“We forecast WPI growth of 1.0 per cent increase in Q3 and we will get an early read on this in next month’s CBA Wage and Labour Insights report.”