Unemployment rate: Signs labour market outlook gloomier than RBA thinks

Economists and the Reserve Bank predict the unemployment rate to edge lower, but worrying signs suggest the jobs market could weaken down the track.

After a shock jump in joblessness to 4.5 per cent in September, the unemployment rate is expected to unwind slightly and settle at 4.4 per cent in fresh labour force figures set to be released by the Australian Bureau of Statistics on Thursday.

The trend line has been steadily moving upwards since the start of 2025.

But in their latest economic forecasts released in November, RBA economists predicted the unemployment rate would remain stable at 4.4 per cent for the foreseeable future.

Several indicators, such as low underemployment, an above-average share of firms struggling to find workers, a high ratio of vacancies to unemployed workers and strong growth in unit labour costs suggested the labour market remained tight, the bank said.

However, two surveys gauging consumer and business sentiment this week painted a gloomier picture.

Unemployment expectations shot up to their highest level since the pandemic in the Westpac-Melbourne Institute consumer sentiment index on Tuesday.

“This is consistent with softening jobs growth in recent months and suggests that households are increasingly nervous about the labour market outlook,” AMP economist My Bui said.

NAB’s monthly business survey, also released on Tuesday, showed employment conditions have stagnated in recent months.

Future hiring in the market sector would not be enough to make up for an expected slowdown in government-related hiring, which meant slower jobs growth and higher unemployment, she said.

AMP analysts forecast the unemployment rate to tick up to 4.6 per cent in 2026.

That would give the RBA room to deliver another one or two cuts in 2026, Ms Bui said.

Despite financial conditions easing following the central bank’s three rate cuts in 2025, many Australians were still doing it tough.

More than one in four Australians earn money through a side hustle, while another 28 per cent are considering launching one in the next 12 months, Westpac research found.

According to the survey, earning extra income to provide financial relief was the main driver for picking up a side hustle, Westpac national general manager Anthony Mathews said.