Australia Jobs Fall 39,300 as Unemployment Hits 4.7%

Australia’s labour market weakened unexpectedly in September, with employment recording a sharp decline and the unemployment rate reaching 4.7%, raising questions about the Reserve Bank of Australia’s (RBA) next interest rate decision.

Data released Thursday by the Australian Bureau of Statistics (ABS) showed employment fell by 39,300 jobs in September, significantly missing economists’ forecasts for a gain of 19,600. August’s employment increase was revised to 29,300 from the previously reported 39,500.

The unemployment rate stood at 4.7%, exceeding market expectations of 4.6%. August’s reading was also revised upward to 4.7%. Meanwhile, Australia’s labour force participation rate declined to 66.8% from 67.0%, indicating fewer people were actively working or seeking employment.

Part-time employment accounted for most of the weakness, falling by 73,700 positions. However, full-time jobs increased by 34,400, partially offsetting the overall decline.

The underemployment rate climbed to 6.3% from 6.2%, while the number of unemployed Australians rose by 8,900 to 732,000.

Despite the disappointing headline figures, the ABS reported that trend employment increased by 15,700 in September, with the trend unemployment rate holding steady at 4.6%.

ANZ economists said the broader six-month employment trend suggested Australia's labour market was gradually cooling, reflecting slower hiring and rising unemployment.

The weaker jobs report follows the RBA’s September decision to raise its benchmark interest rate by 25 basis points to 4.60%, marking its fourth increase this year as policymakers continue battling persistent inflation.

The latest employment figures could influence the RBA’s November 2-3 policy meeting, although inflation remains a major concern.

ANZ acknowledged that deteriorating labour conditions reduced the likelihood of another interest rate increase but maintained its forecast for a further 25-basis-point hike in November.

The bank identified Australia’s quarterly inflation report, scheduled for October 28, as a crucial factor in determining the central bank’s next move. Higher inflation readings could strengthen expectations for additional monetary tightening despite weaker employment.

Financial markets reacted cautiously to the Australian jobs data. The Australian dollar weakened approximately 0.3% against the U.S. dollar, while the S&P/ASX 200 index trimmed earlier losses to trade 0.2% lower.