Last month, I noted that the sharp shift towards part-time work was the first signal that a labour market contraction was coming. The latest data released today confirms that the contraction is now eating into overall employment and pushing the unemployment rate up. The Australian Bureau of Statistics (ABS) released the latest labour force data today (August 20, 2026) – Labour Force, Australia – for July 2026 – which showed that the labour market deteriorated in July. Employment growth was negative although the economy added full-time jobs, which offsets some of the severity of the decline. Overall working hours contracted sharply. Official unemployment increased but the increase would have been larger had the participation rate not decelined by 0.2 points. Had the participation rate not declined in July, the official unemployment rate would be around 4.7 per cent rather than the published rate of 4.5 per cent. There are now 10.8 per cent of available labour not being used (either unemployed or underemployed), which makes a farce of the RBA’s claims that the labour market is tight. There is substantial scope for more job creation given the slack that is present. There is substantial scope for more job creation given the slack that is present.