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# Has Australia's Jobs Market Taken a Turn? What Does This Mean for Interest Rates?
- URL: https://www.benchmarkanalytics.com.au/has-australias-jobs-market-taken-a-turn-what-does-this-mean-for-interest-rates/
- Published: 2026-10-17T06:22:33.000Z
- Updated: 2026-10-17T06:22:33.000Z
- Description: Australian employment dropped sharply in September, but trend figures tell a more complicated story. With inflation still elevated, the RBA faces an increasingly difficult interest rate decision.
- Author: Nick Hossack
- Tags: Labour Market, Unemployment Rates, Interest Rates, RBA, ABS, Australian Economy, Employment, Part-time Employment

Australia's latest employment figures have complicated the Reserve Bank's job. Just weeks after lifting the cash rate to 4.60%, the RBA is confronting evidence that the labour market may be weakening faster than expected.

The ABS has reported that employment fell by **39,300 people in September**, while unemployment reached **4.7%**, its highest level in almost five years.

The composition of the employment decline is particularly interesting. Part-time employment fell by 73,700, partly offset by an increase of 34,400 full-time workers. The participation rate declined to 66.8%, while the proportion of working-age Australians employed fell to 63.6%.

Importantly, the unemployment rate can understate a weakening labour market when people stop looking for work and consequently leave the labour force.

**However, there is an important qualification.**

The ABS's less volatile trend estimates show employment actually increased by 15,700 during September, while trend unemployment remained at 4.6%. Total hours worked also increased marginally.

These figures suggest caution before concluding that employment has entered a sustained contraction.

## What does this mean for the RBA?

The RBA increased the cash rate by 25 basis points to 4.60% on 29 September, citing persistent inflation and rising energy costs.

The inflation problem remains substantial. Annual headline inflation reached 4.0% in August, while underlying inflation, measured by the trimmed mean, stood at 3.6%. Both exceed the RBA's 2–3% target.

The policy dilemma is straightforward. Higher interest rates restrain spending and inflation, but they also weaken business activity and employment.

The danger is that monetary policy, which operates with considerable delays, could continue restraining the economy after inflationary pressures have begun easing.

Equally, cutting rates prematurely could allow inflation to become entrenched.

The next important test comes on **28 October**, when the ABS releases September inflation figures, ahead of the RBA's **3 November** decision.

For now, the employment figures strengthen the case for holding interest rates steady while the RBA assesses whether the labour-market deterioration is temporary or sustained.

Further tightening would require increasingly persuasive evidence that inflation, rather than unemployment, represents the greater economic risk.

| BENCHMARK ANALYTICS \| DATA INSIGHT Australia's Employment Warning Signs September 2026                                                                                                                                                                                                                                                                                                                                                                                                                                   | Seasonally adjusted, unless stated |
| ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- |
| Unemployment rate 4.7% +0.1 percentage points\* Participation rate 66.8% −0.2 percentage points Monthly change in employment Number of people \| Seasonally adjusted Full-time +34,400 Part-time −73,700 Total −39,300 But the ABS underlying trend tells a different story +15,700 Increase in trend employment during September **The distinction:** The seasonally adjusted measure captures short-term movements. The trend measure smooths monthly volatility and is better suited to identifying sustained changes. |                                    |
| \*The 0.1 percentage point change is calculated from unrounded estimates; both August and September round to 4.7%. Bar lengths reflect absolute employment changes, not shares of the workforce.Source: [ABS Labour Force, Australia, September 2026](https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/sep-2026?ref=benchmarkanalytics.com.au) (released 15 October 2026).                                                                                                     |                                    |