Australia jobs fall by 39,300 in September as unemployment stays at 4.7%

Australian employment fell unexpectedly in September, with the unemployment rate holding at 4.7%, its highest level in five years. 

The sharp decline in part-time jobs signalled growing weakness in the labour market. Figures have reduced expectations of another interest rate hike by the Reserve Bank of Australia (RBA) this year, Reuters reported.

Data from the Australian Bureau of Statistics (ABS) showed net employment fell by 39,300 in September from August, when jobs increased by a downwardly revised 29,300. 

Economists had forecast an increase of around 20,000, making September's decline a significant miss against expectations.

The fall was the largest monthly employment decline since February 2025, with part-time positions dropping by 73,700. Full-time employment, however, increased by 34,400, suggesting employers may be reducing flexible working hours while retaining permanent staff.

Rate hike prospects ease

The weaker employment figures have shifted market expectations towards the RBA holding interest rates at 4.6% in November. 

Markets now imply nearly a 90% probability of rates remaining unchanged, up from 66% before the data was released.

The probability of another rate hike in December has also fallen to 32%, with an additional increase no longer fully priced in. The central bank has raised interest rates four times this year as it attempts to bring inflation back within its target range.

However, inflationary pressures remain persistent. Headline inflation rose to 4% in August, while underlying inflation remained at 3.6%, both above the RBA's target band of 2% to 3%.

Part-time jobs bear the brunt

The decline in employment was concentrated in part-time roles, while full-time positions recorded an increase. 

This pattern may indicate that employers are responding to economic pressures by cutting shifts and casual hours before making broader reductions to their permanent workforce.

"Firms are cutting shifts and casual hours first while holding onto full-time staff, a pattern typical of an early hiring downturn," said Sunny Nguyen, head of Australia economics at Moody’s Analytics.

"For the RBA, this is the cooling the Board has sought... Unless the upcoming quarterly CPI surprises sharply to the upside, we expect a hold in November, with the risk tilting toward an overshoot in unemployment next year."

The participation rate also declined to 66.8% from 67% in August, while underemployment edged up to 6.3% from 6.2%. Total hours worked rose marginally by 0.1%.

Inflation remains a policy challenge

Despite signs of a cooling labour market, policymakers face the challenge of balancing weakening employment conditions against inflation that remains above target.

The RBA has previously urged caution in interpreting monthly employment figures because of methodological changes to the survey. Nevertheless, unemployment has reached a level policymakers had not expected until the end of next year.

"For the RBA, the hurdle for an immediate hike has therefore risen materially, but we would not take further tightening off the table," Krishna Bhimavarapu, APAC economist at State Street Investment Management, said in a note.

"The policy trade-off is becoming increasingly uncomfortable. The RBA is trying to finish the inflation fight just as the labor market is beginning to show more convincing signs of weakness."

The latest figures suggest the RBA may have more room to pause its tightening cycle, although the next quarterly consumer price index (CPI) report will be important in determining the direction of monetary policy.