The Otago index dropped 6.5 points to 101.3 in June from 107.8 in March.
However, the June 2010 figure is still ahead of June last year's 95.3 points.
Then, all of the 11 regions surveyed were below 100 points.
Canterbury was the only other region where confidence fell.
The index dropped from 103.8 in March to 102.7 in June.
Otago-Southland Employers Association chief executive John Scandrett said it was interesting to note that the Otago, and Canterbury, employment confidence levels were tracking negatively behind other regional levels.
"This is interesting, because these results mirror what was seen in the Otago and Canterbury Performance of Services Index for April and May.
We can have some confidence in the fact that these independent survey outcomes are presenting reasonably accurate information, even if the latest data isn't what we would ideally like to see in our region."
The association had members confirming recent local slowing of business across the tourism, accommodation and hospitality sectors, he said.
The emphasis now appeared to be on the forward position where the association was receiving "quite buoyant" forecasts on employment needs in the months ahead.
"One would expect that within Otago, the promising signs of a strong winter tourism season and the associated significant lift in aircraft arrivals from Australia are underpinning these positive projections," Mr Scandrett said.
Westpac senior economist Donna Purdue said that overall, employment confidence rose in the June quarter, reaching its highest level in nearly two years.
Employees were becoming less downbeat about their current situation while their optimism around future conditions continued to rise.
The national index rose 4.5 points to 108.2, the highest level since the September 2008 quarter.
An index above 100 indicates there are more optimists than pessimists.
"The recession hit the New Zealand labour market hard, as reflected in plummeting employment confidence in the past couple of years," Ms Purdue said.
After reaching a series high of 135.9 in the September 2007 quarter, confidence had been on a sharp downward trend.
The low point was reached in March last year when the index was at 93.2.
During the past year, employment confidence had been clawing its way back, driven by expectations of better times ahead.
In contrast, employees' evaluation of current employment conditions had made for "particularly sombre reading", consistent with the sharp rise seen in unemployment, she said.
The June 2010 quarter had seen a notable improvement in perceptions of current employment conditions.
Fewer respondents now believed jobs were hard to get.
"The stunning improvement in employment growth in the first quarter of this year, and the resulting sharp decline in unemployment, is likely to have had a positive bearing on responses to this question.
After all, a 25,000 decline in unemployment - seasonally adjusted - in one quarter is unlikely to go unnoticed in a small economy like New Zealand."
There was also some better news about earnings, with more respondents saying their earnings were up compared with a year ago, Ms Purdue said.
The trends in confidence by region and gender were consistent with the developments being seen in the economy more generally.
Economic activity was in the process of rebalancing towards the goods-producing sectors, which were male-dominated.
The service sectors, the realm of female employment, were stagnating.
