Unemployment holds at 4.7% as labour market softens, pressure mounts on RBA to hold rates

New figures from the Australian Bureau of Statistics released on Thursday showed the jobless rate held steady after August's rate was revised upward. The number of unemployed people rose by 8,900 to 732,000, the highest since April 2021.

However, the unemployment rate would have been higher but for a 0.2 percentage point decline in the participation rate to 66.8 per cent, meaning fewer people were either in work or actively looking for it.

"This September a higher proportion of people remained unemployed compared to recent years," said Sean Crick, the bureau's head of labour statistics.

The result was driven by New South Wales, where unemployment jumped 0.4 percentage points to 4.7 per cent after the state lost 35,000 jobs. In June, NSW's jobless rate was just 4 per cent.

Victoria's rate eased by 0.1 percentage point to 5.1 per cent, and South Australia dropped half a percentage point to 4.2 per cent. Total employment in Queensland eased slightly, but the state has added 37,700 jobs over the past 12 months, compared with 34,700 in Victoria and 51,900 in NSW.

The Australian dollar fell almost a quarter of a cent against its US counterpart on expectations that the RBA may not raise rates further.

Oxford Economics Australia economist Oscar Guth said the figures confirmed "the overall softening in the nation's jobs market which had become evident over recent months."

Economists had expected the unemployment rate to remain steady after it lifted in August.

How it's landing

Tarric Brooker aka Avid Commentator 🇦🇺 @AvidCommentator

Economics writer and analyst

ABS Labour Force - Jobs -39.3k - Unemployment rate flat at 4.7% (after revisions to last months data) - Participation rate -0.2% to 66.8% This is an absolutely awful print, a large number of lost jobs and a sizable fall in the participation rate.

15 Oct, 11:10 am View on X

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Analysis

Why This Matters

Australian households face ongoing cost-of-living pressure: a softening labour market reduces wage growth and may ease inflation, but also signals economic weakness that could delay rate relief.
The RBA has raised rates to 4.6 per cent, a 15-year high, while trying to balance inflation control against rising unemployment. Today's data increases the case for a pause.
The participation rate drop suggests some workers have stopped looking entirely, masking the true slack in the jobs market.

Background

Australia's labour market has been gradually loosening from the tight conditions seen through 2023. The RBA's aggressive rate hiking cycle, which began in 2022, has cooled demand but inflation has remained stubborn. The central bank has signalled it will do what is necessary to bring inflation back to target, even at the cost of higher unemployment. Until now, the jobs market had been remarkably resilient.

Key Perspectives

RBA: The central bank is under pressure to hold rates steady. Further tightening could accelerate job losses, but if inflation remains high, it may still be forced to act. The board next meets in November. Households and workers: Fewer jobs and higher unemployment reduce income security, especially in NSW where job losses have been concentrated. However, some sectors still report labour shortages. Economists: Many analysts view today's data as confirmation of a clear softening trend. Oxford Economics Australia expects the RBA to remain cautious, while financial markets have reduced expectations of further rate rises.

What to Watch

Next ABS labour force release (October data, due mid-November) to see if the softening accelerates.
RBA November board meeting: any change in the cash rate or forward guidance.
Consumer confidence and spending data: weaker job markets could dent retail activity.