Australia’s labour market softened in November, with weaker-than-expected employment figures reinforcing expectations that the Reserve Bank of Australia will keep interest rates on hold into the new year.
Headline unemployment held at 4.3%, marginally better than the 4.4% economists forecast, but only because fewer Australians were actively looking for work. The participation rate slipped to 66.7% (67% expected), as about 23,000 people exited the labour force, masking underlying weakness.
Total employment fell 21,300, against expectations of a 20,000 rise. Full-time positions dropped sharply — down 56,000— partly offset by a 35,200 increase in part-time roles, signalling a shift toward less secure work. The employment-to-population ratio dropped to 63.8%, while annual employment growth has slowed to 1.3%, down from about 3% at the start of the year.
Implications for the RBA: weaker labour market, persistent inflation risks
The data leaves the RBA navigating a complicated picture. A softer employment landscape might normally ease inflation pressures, but the Bank has warned that labour-market tightness continues to constrain economic capacity. The unemployment rate remains slightly below the RBA’s own near-term forecasts of 4.4% through 2026–2027.
KPMG chief economist Brendan Rynne said the downturn in November “shows some worrying signs,” highlighting the slowdown in annual employment growth. While the figures track broadly in line with RBA expectations, Rynne said the combination of a weakening labour market and stickier-than-expected inflation “may still cause pause for thought” as the Board considers how to frame monetary policy early next year.
Capital Economics’ senior APAC economist Abhijit Surya said the report “muddies the waters” but does not indicate a labour market in collapse. He noted that a pullback in employment was plausible after unusually strong gains in October, when the ABS reported that more unemployed people than usual moved into work.
Surya emphasised that the trend unemployment rate also fell to 4.3%, and while underemployment rose, both measures remain low by historical standards — insufficient, in his view, to shift the RBA’s core view that conditions are “a little tight.”
He warned, however, that if employment growth weakens more noticeably, it could force a rethink. “As things stand, we suspect [the RBA] will remain squarely focused on price stability… With underlying inflation set to accelerate more strongly than the RBA expects, we still think rate hikes will be on the agenda in early-2026.”
Market reaction and the global backdrop
VanEck head of investments Russel Chesler said the steady unemployment rate reinforces the view that Australia’s jobs market “continues to be tight,” despite underlying productivity challenges. He does not expect the November data to alter the RBA’s rate trajectory.
Chesler also pointed to the widening contrast with the US, where the Federal Reserve has just delivered its third 25-basis-point rate cut of the year. Australian markets rallied sharply following the Fed move, with the ASX 200 up 0.7%intraday and the Australian dollar approaching US$0.67.
However, longer-term bond pricing tells a different story: 10-year Australian government yields have reached a two-year high, indicating markets expect domestic inflation to rebound.
Outlook
November’s labour force report shows a market losing momentum but not collapsing, leaving the RBA facing conflicting signals: moderating employment, still-tight job conditions, and persistent inflation pressures. Analysts broadly agree that while rate cuts remain unlikely in the near term, the probability of further tightening in 2026 cannot yet be ruled out.