BCEC Monthly Labour Market Update – August 2026

• National unemployment rate up from 4.5 per cent to 4.6 per cent, highest rate in almost five years.
• Solid employment growth keeps pressure on Reserve Bank to lift rates, despite the rise in the unemployment rate.
• Volatility in estimates for Western Australia continues with a large rebound in jobs.

WA labour market hits a purple patch

On face value, the latest figures suggest WA’s job market hit a purple patch in August, in what many in that State will be hoping is a positive omen. Employment surged by an estimated 0.7 per cent. People flocked into the labour market to push the participation rate up 0.4 points to 68.4 per cent compared to 67.1 per cent nationally, and well clear even of second placed VIC (67.8%).

Before WA starts painting the labour market purple, a more sober assessment is that the WA figures hit a patch of statistical volatility. August’s result partly reverses what we described as a ‘suspiciously large’ 1.4 per cent plunge in employment in July and a full one-percentage point fall in the participation rate. Oscillations over the past five months saw the employment estimates jump by 0.8 per cent in April, fall 0.9 per cent in May, rebound 1.0 per cent in June, slump 1.4 per cent in July, and now bounce back. The participation rate has swung up and down in sync, leaving the unemployment rate estimates more stable. If nothing else, WA has shown it knows how to come back from behind.

Estimates for male and female employment followed similar swings, so it’s difficult to know what’s behind the volatility. Despite the jump in employment, the unemployment rate actually crept up from 4.4 per cent to 4.5 per cent due to the rise in participation.

For now, NSW has taken WA’s mantle as the state with the tightest labour market, with the highest annual rate of employment growth to August (+2.4%) and lowest unemployment rate of the states (4.3%). Previous MLMU’s noted an acceleration in job creation in the ACT in the first half of this year. That seems to have subsided since June, although the ACT remains the jurisdiction with the lowest unemployment rate, at just 4.0 per cent.

More troubling are developments in the Tasmanian labour market. The number of jobs fell by an estimated 1.0 per cent in August, to be down 2.4 per cent over 12 months. The unemployment rate stands at 5.0 per cent. The island’s labour force has been shrinking, with a participation rate of 60.3 per cent. Recently released population data to the end of March 2026 show Tasmania to be the state with the lowest annual rate of population growth rate at 0.6 per cent, partly due to negative net interstate migration as Tasmanians leave for the mainland.

Rise in unemployment rate unlikely to save mortgage holders

August’s labour force figures take on added significance as the last piece of key economic data released before the Reserve Bank of Australia (RBA) make their call on interest rates on Tuesday 29th of September.

In that light, the increase in the unemployment rate from 4.5 per cent in July to 4.6 per cent in August will be the main talking point. On balance, our assessment is that the August figures serve to underscore the resilience of the Australian labour market rather than point to any weakening.

The last time the unemployment rate was 4.6 per cent was November 2021. At that time the rate was steadily falling as the labour market recovered from the impacts of COVID-19, which saw the unemployment rate peak at 7.4 per cent in the middle of 2020.

That will provide a glimmer of hope that the RBA will opt to keep rates on hold. However, employment grew by a solid 39,500 positions, a sufficiently strong rate of growth – if sustained – to have the unemployment rate trending back down. It didn’t fall on this occasion because of a 0.2 percentage point rise in the participation rate which contributed to 67,700 additional persons entering the labour force in August.

Now sitting at 70.1 per cent, the participation rate is just shy of it’s all-time high of 70.2 per cent, meaning it’s unlikely to continue rising if employers continue hiring at the rate they have been over recent months. Other indicators for August point to sustained strength in labour demand, with vacancies up for the third month in a row, average hours worked increasing, and the proportion of workers who are underemployed falling.

All in all, the latest data point to a tightening labour market and growing wage pressures. We expect the increase in the unemployment rate in August won’t distract the RBA Board from that underlying picture. Employment growth is already running substantially stronger than implied by the forecasts contained in the RBA’s August Statement on Monetary Policy.