Australia Unemployment Rate Rises to 4.6% as Labor Force Expands

Australia’s unemployment rate rose to 4.6% in August as the number of people looking for work increased faster than employment, giving policymakers a fresh sign that the labor market is cooling without showing an outright contraction in jobs.

Seasonally adjusted employment increased by 39,500 people to 14.84 million, while the number of unemployed people rose by 28,200 to 722,900. The participation rate increased by 0.2 percentage points to 67.1%, meaning a larger share of the population aged 15 and over was either employed or actively looking for work.

The Australian Bureau of Statistics’ August labor-force release also showed a shift in the composition of employment. Part-time employment rose by 45,800 people, while full-time employment fell by 6,300. Hours worked increased by 14 million, or 0.7%, after declining by the same amount in July.

A bigger labor force pushed the jobless rate higher

The rise in unemployment did not come alongside a fall in total employment. Instead, the August figures show labor supply expanding at the same time as employers added workers. The unemployment rate can increase when more people enter or re-enter the labor market and begin actively searching for work, even if the economy is still creating jobs.

The ABS said a higher proportion of people who had previously been outside the labor force moved into unemployment than in recent years. With participation rising to 67.1%, the labor force grew faster than employment, lifting the seasonally adjusted unemployment rate from July’s published 4.5% level to 4.6% in August. The ABS calculates monthly changes from unrounded estimates, which is why percentage-point movements do not always match a simple subtraction of the rounded headline rates.

Other indicators were less uniformly soft. The underemployment rate, which measures employed people who want and are available for more hours, fell by 0.1 percentage points to 6.2%. The employment-to-population ratio increased slightly on an unrounded basis and remained at 63.9% when rounded to one decimal place. Over the year, employment was up 238,100 people, or 1.6%, while total hours worked were 1.7% higher.

The split by employment type was more uneven. Full-time employment fell to 10.19 million, while part-time employment increased to 4.64 million. The unemployment rate for men rose to 4.8%, while the rate for women held at 4.4%. Youth unemployment increased by 0.4 percentage points to 10.8%.

The underlying trend also points to gradual easing

Trend estimates, which smooth some of the month-to-month volatility in the survey, also showed the unemployment rate at 4.6% in August. Trend employment rose by 24,000 people, or 0.2%, while trend hours worked were unchanged. The trend underemployment rate stayed at 6.3%, and the broader trend underutilisation rate remained at 10.8%.

Those readings fit a labor market that is still generating employment but has less excess demand for workers than it did earlier in the cycle. The Reserve Bank of Australia said in its August Statement on Monetary Policy that labor-market conditions had eased somewhat and were expected to continue easing gradually as subdued economic growth weighed on demand for workers. Its central forecast at that time had the unemployment rate rising to 4.8% by the end of 2028, while employment growth remained positive.

The August unemployment result is above the 4.4% rate recorded in June, which was the latest monthly figure available when the RBA prepared much of its August economic assessment. Even so, a single monthly release does not establish the pace of future weakening. Participation, hours worked, underemployment and the composition of job growth all affect how much signal policymakers can take from the headline unemployment rate.

August figures carry an important methodology caveat

The ABS has also cautioned users about a change to the way supplementary survey questions are collected. August 2026 marks the completion of its Labour Force Modernisation program, with all rotation groups moved to the new survey system and collection model. Under the previous approach, supplementary questions asked in February and August could influence respondent behavior, so the ABS applied prior adjustments before calculating seasonally adjusted and trend estimates.

Under the new model, supplementary questions are asked only after the core labor-force questions and only of the outgoing rotation group. The ABS therefore no longer applies the historical Supplementary Survey adjustment from August 2026 onward. The agency said it is possible the old adjustment had also been capturing some genuine seasonality, which means removing it could have a small unintended effect on August estimates.

Its sensitivity testing indicated that any such impact should be smaller than the normal month-to-month variation that comes with a sample survey, and the ABS said the August data remain fit for purpose. It nevertheless advised users to take the change into account when interpreting short-term seasonally adjusted movements around August and reiterated that trend estimates provide the best measure of underlying labor-market behavior.

The release arrives just days before the RBA’s next policy meeting. The cash rate target is currently 4.35%, after the central bank raised rates three times earlier in 2026 and then left the rate unchanged in August. The RBA has said inflation remains too high and that it is assessing how tighter financial conditions are affecting demand, inflation and employment.

The RBA’s next monetary policy decision is scheduled for September 29, giving the Board the new labor-force figures as part of the information available for that meeting. The next monthly jobs report, covering September, is scheduled for October 15.