Employment fell but unemployment didn’t budge – here’s what that means
What’s happening: Australia’s unemployment rate remained steady at 4.2% in August despite employment falling by 5,000 people. The participation rate also dropped, masking underlying labour market shifts that are frustrating Reserve Bank policymakers seeking economic cooling.
Why this matters: The persistently low unemployment rate reduces chances of September interest rate cuts and supports property market strength. This tight labour market dynamic affects everything from wage growth to mortgage relief and investment decisions across the economy.
Australia’s labour market delivered a perplexing result in August, with employment declining while unemployment rates remained stubbornly steady, creating challenges for policymakers and mixed signals for the broader economy.
The seasonally adjusted unemployment rate was steady at 4.2 per cent in August, according to data released by the Australian Bureau of Statistics (ABS). However, beneath this headline stability lies a more complex story.
“Employment fell by 5,000 people and the number of unemployed fell by 1,000 people in August,” explained Sean Crick, ABS head of labour statistics. “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.”
The employment-to-population ratio also declined by 0.1 percentage points to 64.0 per cent, with the overall employment drop driven by a significant fall in full-time positions. Full-time employment decreased by 41,000 people, while part-time employment rose by 36,000 people, indicating a shift in the nature of available work.
Gender patterns revealed interesting dynamics: females in full-time employment decreased by 30,000 people, with males down 11,000. However, part-time employment increased for both genders, up 18,000 for females and 17,000 for males.
“Hours worked fell 0.4 per cent in August, supported by less people working full-time hours this month,” Crick noted, highlighting the broader implications of these employment shifts.
Rate reality
The unemployment data has significant implications for monetary policy, with economists adjusting their interest rate cut predictions based on the persistently tight labour market conditions.
Matt Bell, Oliver Hume Chief Economist, sees clear implications for monetary policy timing. “The immediate impact on property markets of today’s in-line Labour Force result for August is that the chances of a September rate cut are still close to zero and the next cut is likely to be delivered on Melbourne Cup day in November, with one more coming sometime in the first half of 2026.”
The Reserve Bank’s frustration with current labour market conditions is evident. “Unemployment remained flat at 4.2% (the same level as July 2024), frustratingly tight from the perspective of the RBA looking for some increase to ease inflation pressures,” Bell explained.
Current market expectations align with this view, with economists predicting another cut to 3.35 per cent in November following the recent reduction to 3.60 per cent. The RBA’s August statement noted that while inflation has continued to come down and is within the target range of 2–3 per cent, the unemployment rate “has increased a little but remains low”.
The underlying trend data shows the unemployment rate actually rose to 4.3 per cent in August on a trend basis, with employment growing by around 18,000 people, or 0.1 per cent monthly, and up 1.7 per cent over the last 12 months.
Property outlook
The steady employment conditions are translating into sustained strength in property markets, particularly in the land development sector where activity continues to accelerate.
Bell is optimistic about property market prospects: “It will also support the strong outlook for land markets for the remainder of 2025 and throughout 2026. With lot sales increasing across the country in the June quarter and September quarter activity pointing to further increases, it’s likely that even those markets where price growth has been subdued (I’m looking at you Melbourne), will start to see prices rise sooner rather than later.”
The labour market’s resilience provides fundamental support for property demand, even as interest rate relief remains delayed. The combination of steady employment levels and eventual rate cuts is expected to sustain market momentum through the coming year.
Underemployment data also showed improvement, falling by 0.1 percentage points to 5.7 per cent in August, which was 0.8 percentage points lower than August 2024. The underutilisation rate, combining unemployment and underemployment, fell to 9.9 per cent, down 0.7 percentage points year-on-year.
Consumer Impact
Despite the delayed rate relief, the stable employment environment offers significant benefits for household finances and consumer spending patterns.
“The good news for consumers is that a low unemployment rate is great for wage growth and household incomes, and combined with falling mortgages rates, is likely to see the strength we saw in consumer spending in the June GDP and July Household spending numbers continue,” Bell observed.
The tight labour market conditions support wage growth expectations, providing households with income growth that can offset some impact of higher interest rates. This dynamic suggests consumer resilience may continue despite monetary policy remaining restrictive for longer than initially expected.
Employment growth of 1.7 per cent over the last 12 months demonstrates the labour market’s underlying strength, while the shift from full-time to part-time employment indicates flexibility in how the economy is absorbing workers.
The ABS noted that more detailed information, including regional labour market data, will be available in the upcoming August 2025 issue of Labour Force, Australia, Detailed, on Thursday 25 September 2025, which may provide further insights into the geographic distribution of these employment trends.
Ben Thompson, CEO, Employment Hero said: “Though unemployment is flat this month, even a modest drop in jobs will ratchet up the caution already rippling through Australian workplaces. What’s striking is that our Annual Jobs Report shows this employment softening comes at a time when 57% of workers are ‘job-hugging’, or prioritising job stability over career-moving opportunities. In other words: many are bracing themselves, not advancing, and that makes even small cracks in the labour market feel a lot bigger.
“It’s important to note the fall in employment was led by full-time jobs, while part-time actually saw a hiring surge. This is a trend we’ve been seeing pretty consistently over the past year: financial strain has business owners leaning on flexible hiring, while workers are picking up multiple gigs to keep up with the cost of living. Our data shows one in three Australians are poly-employed, which rises to 56% for under-25s.”
The good news is that Australians continue to be resilient and resourceful in the face of a tough economy, and I don’t see that changing anytime soon.”
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