Australian labour market – getting worse due to policy failure

Last month the Australian labour market went backwards. That trend is now consolidating and the policy makers seem to be finally getting their wish – to put an increasing number of Australian workers out of work. Two years ago, the official unemployment rate was 3.5 per cent. Now it is 4.5 per cent. That is an extra 153 thousand workers who are now jobless. The Australian Bureau of Statistics (ABS) released the latest labour force data today (October 16, 2025) – Labour Force, Australia – for September 2025, which reveals that the growth in the labour force is outstripping employment growth with the consequence that unemployment has risen rather sharply in September – by 0.2 points. Underemployment also rose by 0.2 points and there are now 10.4 per cent of available labour not being used in one form or another. Meanwhile, if you ring the technocrats at the RBA they will tell you that we have adjusted close to full employment. And for that they should be sacked for incompetence in public office. It is ludicrous to talk about Australia being close to full employment. There is substantial scope for more job creation given the slack that is present.

The summary seasonally-adjusted statistics for September 2025 are:

• Employment rose 14,900 (0.1 per cent).
• Full-time employment fell 8.7 thousand (0.1 per cent).
• Part-time employment rose 6.3 thousand (0.1 per cent).
• Unemployment rose 33,900 (5.2 per cent) to 684,000.
• The unemployment rate rose 0.2 points to 4.5 per cent.
• The participation rate rose 0.1 point to 67 per cent.
• The Employment-population ratio was steady at 64 per cent.
• Monthly hours worked rose 9 million (0.5 per cent).
• Underemployment rose 0.2 points to 5.9 per cent (rising 37 thousand to 909 thousand).
• The Broad Labour Underutilisation rate (the sum of unemployment and underemployment) rose 0.4 points to 10.4 per cent.
• Overall, there are 1,592.9 thousand people either unemployed or underemployed.

The ABS press release – Unemployment rate up to 4.5% – noted that:

The seasonally adjusted unemployment rate rose to 4.5 per cent in September, up from a revised 4.3 per cent in September …

This is the highest seasonally adjusted unemployment rate recorded since November 2021 …

There were 34,000 more unemployed people in September …

The underemployment rate rose by 0.2 percentage points to 5.9 per cent in September …

The underutilisation rate, which combines the unemployment and underemployment rates, rose by 0.4 percentage points to 10.4 per cent.

Summary

1. At some point in an economic cycle, when fiscal drag starts to bite and interest rates are too high, unemployment and underemployment start to accelerate upwards – it looks like that is now happening.

2. Two years ago, the official unemployment rate was 3.5 per cent. Now it is 4.5 per cent. That is an extra 153 thousand workers who are now jobless.

3. And with the rising underemployment, the broad labour underutilisation ratio has risen 0.8 points since late 2022. There is now 10.4 per cent of the available and willing labour supply being wasted – that is, 1,592.9 thousand people who want to work more are either unemployed or underemployed. A shocking indictment of our policy makers.

Employment growth rose modestly in September

• Employment rose 14,900 (0.1 per cent).
• Full-time employment fell 8.7 thousand (0.1 per cent).
• Part-time employment rose 6.3 thousand (0.1 per cent).

The following graph shows the growth in total, full-time, and part-time employment for the last 24 months.

The following table shows the shifts over the last 6 months which helps to see the underlying trend.

The Employment-to-Population ratio provides a measure of the state of the labour market that is independent of the supply shifts in the labour market (driven by the shifts in the participation rate).

The underlying working age population grows steadily while the labour force shifts with both underlying population growth and the participation swings.

The following graph shows the Employment-Population ratio was steady at 64.2 – which provides some counter to the other variables that are indicating a systematic slowdown is underway.

The next graphs show the average monthly change in total employment (first graph) and full- and part-time employment (second graph).

For total employment the monthly average changes were:

• 2022 – 44.8 thousand
• 2023 – 30.8 thousand
• 2024 – 32.6 thousand
• 2025 so far – 12.9 thousand (and falling)

Monthly hours worked rose 9 million (0.5 per cent) in September 2025

A reversal from last month – but hardly any growth at all.

The following graph shows the growth in monthly hours worked for the last 24 months, with the straight line being a simple linear regression to indicate trend.

Unemployment rose 33,900 (5.2 per cent) to 684,000 in September

The official unemployment rate rose by 0.2 points to 4.5 per cent.

It is now above the pre-GFC low and will continue to rise under current policy settings.

The following graph shows the evolution of the official unemployment rate since 1980.

Broad labour underutilisation – up 0.4 points in September

• Underemployment rose 0.2 points to 5.9 per cent (rising 37 thousand to 909 thousand).
• The Broad Labour Underutilisation rate (the sum of unemployment and underemployment) rose 0.4 points to 10.4 per cent.
• Overall, there are 1,592.9 thousand people either unemployed or underemployed.

The following graph shows the evolution of underemployment and the Broad labour underutilisation rate since 1980.

Teenage labour market – loss of full-time jobs

While total employment rose – there was a loss of quality in September.

• Total teenage (15-19) employment rose 12.3 thousand (1.4 per cent) in September 2025.
• Full-time employment fell 1.6 thousand (-0.8 per cent) – second successive month.
• Part-time employment rose 13.8 thousand (2.1 per cent) – basically reversing last month’s decline.

The following table summarises the shifts in the teenage labour market for the month and over the last 12 months.

To put these changes into a scale perspective (that is, relative to size of the teenage labour force) the following graph shows the shifts in the Employment-Population ratio for teenagers.

The Teenage Employment-Population ratios and their monthly changes in September 2025 were:

• Males: 47.5 per cent – up 0.4 points.
• Females: 52.9 per cent – up 0.9 points.
• Total: 50.1 per cent – up 0.6 points.

Conclusion

My standard warning to take care in interpreting monthly labour force changes – they can fluctuate for a number of reasons and it is imprudent to jump to conclusions on the back of a single month’s data.

• As I noted above – there comes a stage in an economic cycle where unemployment starts to accelerate upwards as employment growth weakens and can no longer absorb the growth of the labour force. That seems to now be in train.
• The RBA governor and her Board will be happy that more than 150 thousand workers extra are now jobless than this period 2 years ago. That has been her aim for a few years now.
• Underemployment is also on the rise – by 0.2 points in September – as full-time job opportunities become scarce.
• It remains a fact that with 10.4 per cent of available labour not being used it is ludicrous to talk about Australia being close to full employment. There is substantial scope for more job creation given the slack that is present.

That is enough for today!

(c) Copyright 2025 William Mitchell. All Rights Reserved.