Australia jobless rate rises as economist questions data

Australia's unemployment rate rose to 4.7% in September while employment fell by 39,000, though CreditorWatch Chief Economist Ivan Colhoun said the figures may overstate weakness in the labour market.

The data showed a much larger fall in employment than expected, after economists had forecast a 20,000 increase. August employment growth was also revised down to 29,300 from 39,500, leaving trend employment growth at 16,000 a month.

Colhoun said the monthly results should be treated cautiously because of unusually large moves in New South Wales and in part-time work. He argued those swings were more likely to reflect volatility in the Australian Bureau of Statistics labour force survey than a sudden deterioration in underlying conditions.

At the centre of that concern was a 35,000 drop in employment in New South Wales and a 0.4 percentage point rise in the state's unemployment rate. Nationally, part-time employment fell by 74,000, which Colhoun said was another reason to question the signal from the latest release.

"The huge swings in NSW employment (-35,000) and unemployment (+0.4ppts) and Australian part-time employment (-74,000) cast significant doubt over the reliability of this month's labour market data," said Ivan Colhoun, Chief Economist, CreditorWatch.

He said the disruption was likely linked to changes in the survey process rather than a clear shift in economic momentum.

"This likely reflects additional volatility introduced into the already volatile survey by the ABS's modernisation of the survey, rather than a true signal about the Australian economy or labour market," Colhoun said.

Rate outlook

The figures come at an important point for the Reserve Bank of Australia because they are the final labour market data before its November Board meeting. The unemployment result is also notable because it has reached a level the central bank had not expected until much later.

"The 4.7% unemployment print however is important as the starting point for the RBA's November forecast revisions. The RBA had forecast the unemployment rate to reach 4.7% in December 2027 rather than by September 2026! That will necessitate some significant revision to the unemployment profile - hopefully it might make the RBA place less time and importance on their forecasts and trust their judgement more, given the volatility and broad impossibility of forecasting at the present time," Colhoun said.

Even so, Colhoun does not see the labour market report alone as enough to shift the central bank away from further tightening. He pointed to inflation data as the more decisive near-term indicator, while noting that the latest jobs release contains too much uncertainty to settle the policy debate before the next meeting.

In Colhoun's view, recent commentary from policymakers suggests the Reserve Bank has taken a more determined stance on returning inflation to target. He said that backdrop still points to tighter monetary settings, even if the timing of any further move remains open.

"I still expect the RBA to tighten further in the next few months, though I suspect December or February seems more likely as the Fed also treads gingerly," Colhoun said.

Mixed signals

Beyond the headline fall in employment, other labour market indicators were less dramatic. Underemployment and youth unemployment posted only modest changes, which Colhoun said was more consistent with a gradual easing than a sharp downturn.

He also highlighted a second consecutive monthly increase in SEEK job advertisements in September. The rise was only 0.4% month on month, but it ran against expectations that higher fuel prices and interest rates would place greater pressure on hiring demand.

"It's likely the Australian labour market is easing gradually - as the slight upward trends for the youth unemployment rate and the underemployment rate suggest. Very interestingly, however, SEEK job ads rose for the second successive month in September, which isn't what anyone including myself is expecting, albeit the rise was not especially large this month," Colhoun said.

State-based readings added to the uncertainty in the release. Colhoun noted that unemployment figures for individual states are often volatile from month to month, particularly in smaller states, and said the New South Wales result had a disproportionate effect on the national picture.

Outside New South Wales and Tasmania, most states recorded either lower unemployment or no change during the month. He said that pattern sits uneasily with the reported national deterioration and supports a more cautious reading of the headline figures.

"With the exception of NSW and TAS, most states saw unemployment drop or remain flat this month - quite different from the reported national trend," Colhoun said.