Australia added 39,500 workers in August and still posted its highest jobless rate since late 2021. A rush of new job seekers explains the paradox, and it hands the Reserve Bank the cooling it has been waiting for.
Australia's labour market did two things at once in August. Employment rose by 39,500 people, almost double what economists had forecast. Yet the unemployment rate climbed from 4.5 per cent to 4.6 per cent, its highest level since late 2021, according to the Australian Bureau of Statistics (ABS).\
The numbers only look contradictory. The unemployment rate measures the share of people who want work and cannot find it, so it rises whenever job seekers arrive faster than jobs. In August they arrived in force. The participation rate, the share of working-age Australians either in a job or looking for one, rose 0.2 percentage points to 67.1 per cent. That is a fraction below the record 67.2 per cent set in January 2025.
"This August we recorded a higher proportion of people who were previously not in the labour force moving to being unemployed, compared to recent years," said Sean Crick, the ABS head of labour statistics.
The number of unemployed Australians rose by 28,200 to 722,900. Westpac economist Ryan Wells notes the rate was 4.65 per cent before rounding, a whisker from 4.7 per cent. Young people are carrying more of the load, with youth unemployment up 0.4 percentage points to 10.8 per cent.
Wells points to cost-of-living pressure pulling more people into the job market just as demand for workers cools. Slack, he wrote, is "building gradually through higher unemployment rather than outright employment losses."
Perspective is necessary. Unemployment sat at or above 5 per cent for almost all of 2016 to 2019, and a record 14.8 million Australians are now in work. The ABS has also cautioned that a change to its survey method may have left some seasonal noise in the August figures. Its trend series, which smooths out month-to-month swings, tells the same story regardless: trend unemployment is 4.6 per cent, up from 4.3 per cent in the first quarter of the year.
For the Reserve Bank of Australia (RBA), this is the direction it has asked for. Governor Michele Bullock told a Committee for Economic Development of Australia (CEDA) event on 22 September 2026 that unemployment "between 4.5 and 5 (per cent) will probably take enough heat out of the labour market that it'll ease pressure on inflation." The RBA announces its next cash rate decision at 2.30pm on Tuesday 29 September 2026.
The MPJ Takeaway
This is a labour market cooling on schedule, and the RBA is comfortable letting it cool further. What is slipping is worker bargaining power. With more people chasing each vacancy, the easy job-hop and the big pay jump get harder to land, and younger workers feel it first. We expect unemployment to keep rising into 2027 and to sit closer to 5 per cent than 4.5 by the middle of next year. If you are planning a move, the period when employers fought hard for staff is ending. Make it sooner rather than later.
Australia's labour market did two things at once in August. Employment rose by 39,500 people, almost double what economists had forecast. Yet the unemployment rate climbed from 4.5 per cent to 4.6 per cent, its highest level since late 2021, according to the Australian Bureau of Statistics (ABS).\
The numbers only look contradictory. The unemployment rate measures the share of people who want work and cannot find it, so it rises whenever job seekers arrive faster than jobs. In August they arrived in force. The participation rate, the share of working-age Australians either in a job or looking for one, rose 0.2 percentage points to 67.1 per cent. That is a fraction below the record 67.2 per cent set in January 2025.
"This August we recorded a higher proportion of people who were previously not in the labour force moving to being unemployed, compared to recent years," said Sean Crick, the ABS head of labour statistics.
The number of unemployed Australians rose by 28,200 to 722,900. Westpac economist Ryan Wells notes the rate was 4.65 per cent before rounding, a whisker from 4.7 per cent. Young people are carrying more of the load, with youth unemployment up 0.4 percentage points to 10.8 per cent.
Wells points to cost-of-living pressure pulling more people into the job market just as demand for workers cools. Slack, he wrote, is "building gradually through higher unemployment rather than outright employment losses."
Perspective is necessary. Unemployment sat at or above 5 per cent for almost all of 2016 to 2019, and a record 14.8 million Australians are now in work. The ABS has also cautioned that a change to its survey method may have left some seasonal noise in the August figures. Its trend series, which smooths out month-to-month swings, tells the same story regardless: trend unemployment is 4.6 per cent, up from 4.3 per cent in the first quarter of the year.
For the Reserve Bank of Australia (RBA), this is the direction it has asked for. Governor Michele Bullock told a Committee for Economic Development of Australia (CEDA) event on 22 September 2026 that unemployment "between 4.5 and 5 (per cent) will probably take enough heat out of the labour market that it'll ease pressure on inflation." The RBA announces its next cash rate decision at 2.30pm on Tuesday 29 September 2026.
The MPJ Takeaway
This is a labour market cooling on schedule, and the RBA is comfortable letting it cool further. What is slipping is worker bargaining power. With more people chasing each vacancy, the easy job-hop and the big pay jump get harder to land, and younger workers feel it first. We expect unemployment to keep rising into 2027 and to sit closer to 5 per cent than 4.5 by the middle of next year. If you are planning a move, the period when employers fought hard for staff is ending. Make it sooner rather than later.