The Australian labour market delivered a mixed picture in August, as unemployment reached its highest level in almost five years even though the economy added more jobs than expected. The seasonally adjusted jobless rate rose by 0.2 percentage points to 4.6%, according to data released by the Australian Bureau of Statistics on September 24, 2026.
Despite the rise in unemployment, the economy added 39,500 jobs during the month, nearly double what analysts had forecast. However, the quality of those positions raised concerns: part-time employment surged by 45,800, while full-time roles declined by 6,300. This divergence suggests that while employers are still hiring, they are increasingly relying on part-time workers, potentially reflecting caution about the economic outlook.
The participation rate also climbed by 0.2 percentage points to 67.1%, meaning more people are actively seeking work, which partly explains the higher unemployment figure. The underemployment rate, which measures those working fewer hours than they would like, ticked down slightly to 6.2%. Total hours worked increased by 14 million to 2,009 million, a rise of 1.7% year-on-year.
The ABS cautioned that the monthly changes should be interpreted with care following a recent update to its survey methodology. The smoother trend measure also showed the unemployment rate at 4.6%, with trend employment increasing by 24,000.
Market Reaction
Investors showed little relief from the jobs data, as the likelihood of a rate hike remained firmly priced in. According to market pricing, there is a 96.5% chance that the Reserve Bank of Australia will raise its cash rate by 25 basis points to 4.60% at its meeting on September 29. The RBA has already lifted rates three times during 2026, with the current target standing at 4.35%.
The S&P/ASX 200 closed 0.72% lower at 8,702.0, recovering from an early drop of 1.34%. The Australian dollar ended the session near 70.38 U.S. cents, little changed after the release.
Analyst Views
Analysts remain divided on the RBA's next move, but the majority expect an increase. Russel Chesler, head of investment and capital markets at VanEck, said the slight softening in the labour market is not enough to stop the central bank from raising rates next week. He also suggested another increase could follow in December, with rates potentially reaching 5.10% next year.
David Bassanese from BetaShares also expects a 25-basis-point hike, arguing that higher unemployment is the slack needed to curb domestic inflation. Elias Haddad of Brown Brothers Harriman echoed this view, noting that further tightening would limit policy divergence and support the Australian dollar.
Rate-Sensitive Sectors Under Pressure
Rate-sensitive shares were the clearest market test of the data. The real estate sector fell 1.93%, more than twice the broader index decline, while financials dropped 0.83%. Weaker metals prices and overseas losses also weighed on the session.
The counterargument to a hike is gaining strength. Unemployment has exceeded the 4.5% consensus forecast, and full-time employment contracted. If next month's data shows another weak reading, a September increase could prove to be the final move in this tightening cycle.
Outlook
The jobs report does not settle the inflation trade-off; instead, it raises the cost of being wrong. Markets will now scrutinise the RBA's guidance for clues on whether 4.60% would be a terminal rate or just another waypoint. The central bank's decision is scheduled for 14:30 AEST on September 29.
Risks remain two-sided. A September increase could deepen the full-time jobs slowdown and property weakness, while a surprise hold could reverse crowded rate positions and pressure the Australian dollar. Investors will be watching closely for any shift in the Board's assessment of participation, hours, and full-time hiring trends.
