Australian labour market – shifts towards part-time work perhaps the first signal that a contraction is coming

The Australian Bureau of Statistics (ABS) released the latest labour force data today (July 23, 2026) – Labour Force, Australia – for June 2026 – which provided mixed signals about the state of the labour market. While employment growth was positive, it was biased to part-time work, which is perhaps signalling a weakening as the first adjustment typically made by employers is to reduce hours of work before they cut jobs overall. However, on the other side, participation grew, which means more workers are either working or seeking work. However, the bias towards part-time work was manifest in the rising underemployment rate. There are now 10.9 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.

The summary seasonally-adjusted statistics for June 2026 are:

• Employment rose 76,300 (0.5 per cent).
• Full-time employment rose 29.3 thousnd (0.3 per cent).
• Part-time employment rose 47 thousand (1.0 per cent).
• Unemployment rose by 12,700 to 686,800 persons.
• The unemployment rate was stable at 4.4 per cent when rounded to one decimal place – actually moved from 4.371 per cent to 4.428 per cent).
• The participation rate rose 0.3 points to 67 per cent.
• The Employment-population ratio rose 0.3 points to 64 per cent.
• Monthly hours worked rose 4.9 million (0.2 per cent).
• Underemployment rose 0.2 points to 6.5 per cent (rising 35.8 thousand to 1009.6 thousand).
• The Broad Labour Underutilisation rate (the sum of unemployment and underemployment) rose 0.2 points to 10.9 per cent.
• Overall, there are 1,696.4 thousand people either unemployed or underemployed.

The ABS press release – Unemployment rate remains at 4.4% in June – noted that:

The seasonally adjusted unemployment rate remained at 4.4 per cent in June …

In June, we recorded a 76,000 person rise in employment, driven by a 47,000 person rise in part-time employment …

The number of unemployed rose by 13,000 people in June, which combined with the growth in employment, led to the participation rate rising by 0.3 percentage points to 67.0 per cent in June …

The underemployment rate rose 0.2 percentage points to 6.5 per cent in June.

Summary

1. Higher employment growth but biased towards part-time work, which may signal the first stage of a major slowdown as employers typically adjusts hours down before shedding actual jobs.

2. The part-time bias manifests as a rise in underemployment – so while the official unemployment rate remained at 4.4 per cent, the degree of slack in the labour market rose, with the broad labour underutilisation rising by 0.2 points to 10.9 per cent.

3. More than a million workers are underemployed now in Australia and nearly 1.7 million workers are either unemployed or underemployed. That is a very slack labour market.

Employment growth biased towards part-time jobs

• Employment rose 76,300 (0.5 per cent).
• Full-time employment rose 29.3 thousnd (0.3 per cent).
• Part-time employment rose 47 thousand (1.0 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 rose 0.2 points to 64 per cent in June.

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 – 46 thousand
• 2023 – 30.7 thousand
• 2024 – 30.3 thousand
• 2025 – 12.6 thousand
• 2026 to date – 26.9 thousand

Monthly hours worked rose 4.9 million (0.24 per cent) in June 2026

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 by 12,700 to 686,800 persons

The unemployment rate was stable at 4.4 per cent when rounded to one decimal place – actually moved from 4.371 per cent to 4.428 per cent)

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

Broad labour underutilisation – rose 0.2 points to 10.9 per cent in June 2026

• Underemployment rose 0.2 points to 6.5 per cent (rising 35.8 thousand to 1009.6 thousand).
• The Broad Labour Underutilisation rate (the sum of unemployment and underemployment) rose 0.2 points to 10.9 per cent.
• Overall, there are 1,696.4 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 – improved

There was a substantial decline in full-time employment for teenagers in June.

• Full-time employment fell 6.7 thousand (-3.5 per cent).
• Part-time employment rose 13.7 thousand (2 per cent).
• Total teenage (15-19) employment rose 6.9 thousand (0.8 per cent).

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 data reports the shifts in the Employment-Population ratio for teenagers.

The Teenage Employment-Population ratios and their monthly changes in June 2026 were:

• Males: 47.7 per cent – up 0.1 point.
• Females: 52.4 per cent – up 0.6 points.
• Total: 50 per cent – up 0.4 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.

• The labour market exhibited mixed signals in June.
• While employment growth was positive, it was biased to part-time work, which is perhaps signalling a weakening as the first adjustment typically made by employers is to reduce hours of work before they cut jobs overall.
• However, on the other side, participation grew, which means more workers are either working or seeking work.
• There are now 10.9 per cent of available labour not being used (either unemployed or underemployment), 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.

That is enough for today!

(c) Copyright 2026 William Mitchell. All Rights Reserved.