Australia’s labour market shows signs of cooling with a surprise fall in employment, raising the case for more Reserve Bank interest rate cuts.
Although the unemployment rate held steady at 4.2 per cent in August, 5400 jobs were lost from the economy, the Australian Bureau of Statistics reported on Thursday.
Forecasters had pencilled in a rise in employment of more than 20,000.
Despite the fall, Australia’s relatively low unemployment rate was unchanged because the number of unemployed people fell by 900, head of labour statistics Sean Crick said.
“This meant that the unemployment rate remained steady at 4.2 per cent whilst the participation rate fell by 0.1 percentage points to 66.8 per cent,” he said.
IG market analyst Tony Sycamore said the fall in employment and participation indicates Australia’s jobs market was cooling faster than expected.
A lower participation rate was a sign more working-age people were giving up on looking for work, which might reflect “growing pessimism” among jobseekers after high-profile layoffs in multiple sectors.
“Despite resilient labour market data until now supporting the RBA’s cautious easing of monetary policy, today’s jobs report suggests downside risks are mounting,” Mr Sycamore said.
“The RBA’s forecast of a 4.3 per cent unemployment rate by December 2026 may now face upward pressure.”
Australia’s central bank is expected to leave interest rates on hold at its meeting at the end of September, but the surprise employment result raises the chance of a cut at the RBA board’s following meeting on Melbourne Cup day.
The amount of full-time jobs in the economy dropped by 41,000, but that was partly offset by a rise in part-time employment of 36,000.
Women accounted for most of the loss in full-time jobs.
Employment as a proportion of Australia’s total population fell by 0.1 percentage points to 64 per cent.
Strong population growth means the employment-to-population ratio remains around the same level as two years ago, despite a rise in job creation.
The ABS reported on Thursday that net overseas migration added 316,000 people to the population in the 12 months to March.
While lower than the 335,000 increase in 2024, the figure is still significantly higher than the pre-COVID average of less than 220,000.
Housing Industry Association chief economist Tim Reardon said the influx of migrants had contributed to the demand for homes outpacing supply.
“Volatile migration flows lead to undesirable economic, social and business outcomes,” he said.
“The goal of stable and reliable migration pathways has not been balanced with the removal of restrictions on new home building necessary to meet demand.”
Treasurer Jim Chalmers said the labour market had been a source of genuine strength, with more than 1.1 million jobs created under the Albanese government.
“All Australians should be proud that while the global economy has been uncertain and volatile and unpredictable, we have been able to keep unemployment low and we see that again in the figures today,” he said.
Thursday’s labour force readout came after the Federal Reserve cut interest rates rates for the first time in 2025 overnight following weakness in the US jobs market.