Australia’s labor market weakened unexpectedly in September, with employment falling sharply and the unemployment rate reaching 4.7%. The disappointing figures have raised fresh questions about the Reserve Bank of Australia’s (RBA) next interest rate decision.
According to data released Thursday by the Australian Bureau of Statistics (ABS), employment declined by 39,300 positions in September. Economists had expected an increase of 19,600 jobs.
Meanwhile, August’s employment growth was revised down to 29,300 from the previously reported 39,500, adding to concerns about slowing labor market momentum.
Australian Unemployment Rate Reaches 4.7%
Australia’s unemployment rate stood at 4.7% in September, exceeding economists’ forecasts of 4.6%.
However, the ABS also revised August’s unemployment rate upward to 4.7% from the initially reported 4.6%, indicating that the rate remained unchanged on a revised basis.
The labor force participation rate declined to 66.8%, compared with a revised 67.0% in August. Analysts had expected the participation rate to remain at 67.0%.
The decrease suggests that a smaller proportion of Australians were either employed or actively seeking work during September.
Additionally, the number of unemployed people increased by 8,900 to approximately 732,000.
The underemployment rate also climbed to 6.3%, up from 6.2% in the previous month, reflecting additional signs of weakness in labor market conditions.
Part-Time Job Losses Drive Employment Decline
The unexpected deterioration in Australian employment was primarily driven by a substantial reduction in part-time positions.
Part-time employment plunged by 73,700 jobs during September, more than offsetting an increase of 34,400 full-time positions.
Despite the sharp monthly decline, the ABS emphasized that employment figures can fluctuate considerably from month to month.
On a trend-adjusted basis, employment increased by 15,700 positions in September, while the unemployment rate remained at 4.6%.
Nevertheless, analysts at ANZ noted that the broader six-month trend indicates a gradual weakening of Australia’s labor market.
The bank highlighted subdued employment growth and an upward trend in unemployment as evidence that labor market conditions are becoming less favorable.
RBA Interest Rate Outlook Becomes More Uncertain
The weaker employment report arrives shortly after the Reserve Bank of Australia raised its benchmark interest rate by 25 basis points to 4.60% in late September.
That decision marked the central bank’s fourth interest rate increase of 2026, reflecting its continued efforts to contain persistent inflation.
However, the latest labor market figures could complicate the RBA’s monetary policy strategy.
Slower employment growth and rising unemployment may eventually reduce wage pressures, helping to moderate consumer price inflation.
At the same time, policymakers remain concerned about inflation staying above desired levels.
The central bank must therefore balance the risks of persistent price pressures against the potential economic consequences of further interest rate increases.
The RBA’s next monetary policy meeting is scheduled for November 2–3.
ANZ Still Expects Another RBA Rate Hike in November
Despite the disappointing employment data, ANZ continues to forecast another 25-basis-point interest rate increase at the RBA’s November meeting.
The bank acknowledged that the weaker labor market makes further monetary tightening less certain.
However, it maintained that upcoming inflation figures and broader economic conditions will ultimately determine the central bank’s decision.
According to ANZ, Australia’s quarterly inflation report, scheduled for October 28, will be particularly important.
The bank expects inflation to begin from a higher level than previously anticipated, potentially prompting upward revisions to the RBA’s inflation forecasts.
Consequently, ANZ still considers another November interest rate increase more likely than not, despite the unexpected decline in employment.
Australian Dollar Falls Following Weak Jobs Report
The Australian dollar weakened following the release of the disappointing labor market figures.
The AUD/USD currency pair declined 0.3% as investors reassessed the likelihood of additional monetary tightening by the Reserve Bank of Australia.
Meanwhile, Australia’s benchmark S&P/ASX 200 stock index reduced its earlier losses, trading approximately 0.2% lower.
The mixed market reaction reflected uncertainty about how the weaker employment figures might influence future interest rate decisions.
Looking ahead, investors will closely monitor Australia’s upcoming inflation data and statements from RBA policymakers.
While slowing employment growth could reduce pressure for further interest rate hikes, persistent inflation remains a major concern.
As a result, the November RBA meeting could prove particularly important for the Australian dollar, domestic financial markets and the broader economic outlook.
