Australia's employers are showing more reluctance to make new hires than they have in almost three years, according to global recruiting firm TMP Worldwide eResourcing.

The survey of 6,000 employers found that after a positive first quarter, there has been a rapid contraction, with only 32% of respondents expecting to hire, down from almost 40% in the previous period. About 11% of respondents say they plan to lay people off in the next three months, compared with last quarter's 9.9%.

"Australia's economy often mirrors the U.S. economy," says Ian Burns, director of TMP Worldwide eResourcing in Australia. "This job market is just going back to the expectations of November 1998, which is not that long ago. And I can't remember 1998 being a very difficult year."

But for now, companies are still cautious of the economic situation.

Australia's small businesses have been the hardest hit by the U.S. economic slowdown, with close to 60% of employers freezing hiring this quarter, compared with 49% last quarter. Large companies aren't much more optimistic. Compared with last quarter, when only half of companies surveyed expected to maintain staff levels, 56% of employers at large companies this quarter plan to stay at their current headcount.

Telecommunications and information technology sectors were among the most affected by the U.S. economic slowdown, according to the survey. Both areas have been reducing expansion since the end of 2000. Information technology, only recently a sector with more than 60% of its companies hiring new employees, is in a holding pattern: about 47% of employers plan to expand this quarter. In the telecommunications sector, which in recent years also has aggressively hired staff, only 40% of the employers are expecting staff growth, which is down 27 percentage points from last quarter.

While no industry is seeing boom times this quarter, some sectors such as tourism do have moderately positive outlooks. According to the survey, Australia's tourism industry is rebounding from the post-Olympics hiring slump of last quarter. More than 35% of the companies in that sector are planning to hire staff, up 15 percentage points from last quarter.