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Unemployment steady but jobs markets showing signs of softness

Australia’s labour market weakened in August, with employment falling and fewer people looking for work.

18 September 2025

Commonwealth Bank office

CBA Economist Harry Ottley today published a note assessing the August labour force survey – below is an overview the analysis.

  • Three of last four months have seen soft employment growth: jobs down 5,400 in August, reversing July’s solid gains.
  • Fewer people are participating: the participation rate dropped to 66.8 per cent, led by a fall in female participation.
  • Unemployment is creeping up: trend unemployment rose to 4.3 per cent, from 4.0 per cent at the start of the year.

A softer month for jobs

Australia’s unemployment rate held at 4.2 per cent in August, but the latest labour force survey shows the jobs market is losing momentum. Employment fell by 5,400 and fewer people were actively looking for work.

“The August result was soft, but the survey is volatile month to month,” said Harry Ottley, Economist at CBA.

“Even so, we’re seeing a slow loosening in the labour market. If market sector jobs don’t pick up soon, unemployment could rise more than expected.”

Trend data shows gradual slowdown

Trend unemployment smooths out short-term ups and downs to show the longer-term direction of the jobs market. It rose to 4.3 per cent in August - up from 4.0% at the start of the year, suggesting the labour market is gradually softening. Hours worked also fell, and the employment-to-population ratio dropped to its lowest level since March - suggesting job growth isn’t keeping pace with population growth.

State-level results were mixed. South Australia saw the biggest rise in unemployment (up 0.6 percentage points to 4.9 per cent), while Western Australia recorded the largest fall (down 0.3 points to 3.8 per cent).

What it means for the RBA

The unemployment rate is broadly tracking as the Reserve Bank of Australia (RBA) had expected. With unemployment nearing the RBA’s forecast peak however, any further rise could influence interest rate decisions into 2026.

Read Harry’s full report here. 

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The information presented is an extract of a Global Economic and Markets Research (GEMR) Economic Insights report. GEMR is a business unit of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945.
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