NSW unemployment hits five-year high as interest rates, petrol prices bite

Figures from the Australian Bureau of Statistics show the number of people without a job in NSW jumped by 34,000 over three months, reaching the highest level since the COVID-19 crisis. The jobless rate is now at its highest since November 2021, when the state economy was recovering from pandemic lockdowns. Economists noted the unemployment rate would have been higher still had the labour force participation rate, the share of people in work or looking for work, not fallen.

The Reserve Bank raised interest rates in February, March and May, and demand for employment has deteriorated sharply since. The state's unemployment rate has climbed from 4 per cent in June to 4.7 per cent, and the total number of employed people last month was the lowest since January, meaning most jobs added this year have since been lost.

Full-time male employment has been hit especially hard, with the number of men in full-time work falling by more than 31,000 since June.

KPMG urban economist Terry Rawnsley said the rise reflected the economic headwinds buffeting NSW.

"We've had interest rate increases, we've got the fuel price shock working through the system, which is feeding into cost of living pressures, so all these factors have taken a bit of steam out of the NSW labour market," he said. "Unfortunately, that does mean many people are not finding the hours they're looking for, or not finding the jobs they're looking for."

The figures put the Reserve Bank on notice to hold off on further rate rises as the jobless rate hits a five-year high.

Analysis

Why This Matters

The deterioration in NSW, Australia's largest state economy, signals that rate rises are now feeding into the jobs market, not just inflation.
Households face a double squeeze: higher mortgage and fuel costs alongside a weakening jobs market.
The figures increase pressure on the Reserve Bank to hold off on further rate rises to protect employment.

Background

The Reserve Bank raised interest rates in February, March and May to cool the economy. Higher borrowing costs typically slow demand, including hiring, and the NSW figures show that process now under way. Elevated petrol prices have added to cost-of-living pressures, while falling house prices have weakened household confidence and spending. The fall in the participation rate is significant: it has kept the headline unemployment rate lower than it would otherwise have been, masking some of the weakness in the jobs market.

Key Perspectives

Jobseekers and workers: More people are competing for fewer roles, with full-time male employment bearing the brunt of the decline. Since June, the number of men in full-time work has fallen by more than 31,000. KPMG economist Terry Rawnsley: The rise in unemployment reflects the combination of rate increases, the fuel price shock and cost-of-living pressures taking the steam out of the NSW labour market. The Reserve Bank: The jobless numbers put the bank on notice to hold off on further rate rises, forcing it to weigh its inflation mandate against a weakening employment picture.

What to Watch

The next ABS labour force release, to see whether the national jobless rate follows NSW higher.
Whether the participation rate continues to fall, which would mask the true scale of job losses.
The RBA's next interest rate decision and any shift in its language on the jobs outlook.

Analysis

Why This Matters

Background

Key Perspectives

What to Watch

Sources