BCEC Monthly Labour Market Update – December 2025

• Unemployment rate falls from 4.3 per cent to 4.1 per cent on the back of a rebound in jobs.
• Since the rate peaked at 4.4 per cent in September, the labour market has remained significantly tighter than anticipated in key official forecasts.
• December’s jobs surge raises the stakes for the February interest rate call, with much riding on the inflation figures due out next week.

The only way is up …

Robust employment figures for the month of December have put an end to any remaining hopes of an interest rate cut when the Reserve Bank of Australia’s (RBA’s) Monetary Policy Board meet in early February. The key question at that meeting is likely to be whether the Board regards conditions to be strong enough to warrant an immediate rate increase, or whether it opts to hold steady in the hope that the inflation outlook continues to improve.

The December labour force estimates show employment jumping by 65,200 persons. Almost all of that increase came in the form of additional male, full-time positions (+62,500). That pushed the national unemployment rate back down to 4.1 per cent, below recent expectations. The RBA’s latest forecast, released in November, anticipated the unemployment rate levelling off at around 4.4 per cent through the December 2025 quarter. Treasury forecasts, released in December, had it rising from 4.2 per cent to 4.5 per cent by the June quarter of 2026.

The drop in the unemployment rate was all the more notable given the participation rate edged higher by 0.1 percentage points to 66.7 per cent. December also saw a fall in the underemployment rate, an increase in aggregate hours worked, and the largest uptick in vacancies advertised on the internet in eight months (+3.2%).

It’s worth noting that there was a significant downward revision of almost 30,000 persons to the November employment estimate, so the strong outcome in December comes from a weaker base than previously estimated. Even so, there’s no doubt that the labour market is proving more resilient than anticipated when the unemployment rate peaked at 4.4 per cent back in September.

That’s bad news for mortgage holders. The RBA will get one more reading on inflation prior to the February board meeting, with the release of the Consumer Price Index for the month of December. A softer than expected inflation outcome would strengthen the case for rates to remain on hold. However, following annual CPI increases of 3.8 per cent and 3.4 per cent to October and November, respectively, this month’s labour force figures mean it will require the December CPI figure to come in well below expectations.

Industry developments and a new vacancy series

We’ve been monitoring the employment by industry figures, released quarterly by the ABS, for clues on developments in the transition to a renewable economy and the ‘Future Made in Australia’ vision of Australia emerging as a ‘green superpower’.

This month’s MLMU looks at annual changes in employment by industry based on the recently released November 2025 figures. Whether one looks back over one, five, or ten years, ‘Electricity, gas, water and water services’ stands out as the fastest growing industry on trend measures. Employment in the sector expanded by 61 per cent over the past decade, far ahead of overall employment growth of 24 per cent.

Looking at sub-divisions within the sector, employment growth in ‘Electricity Supply’ rocketed to 155 per cent over the past 10 years, while employment in ‘Gas Supply’ fell by almost 60 per cent.

An optimistic view would see that as a sign of surging demand for – and employment in – electricity generation supporting greater manufacturing output and other energy intensive activities, such as data centres. A pessimistic view is that it points to declining output per worker and higher electricity prices that will push energy intensive production offshore.

There’s certainly no sign of a resurgence in manufacturing. The number of manufacturing jobs fell by around 1 per cent over the year, and on trend figures are lower than a decade ago. As a share of total employment, manufacturing continues to trend down, roughly halving since the turn of this century to now stand at 5.6 per cent.

Coupled with recent sharp rises in electricity prices, the balance of evidence currently leans towards the more pessimistic view, but this remains an area we will continue to monitor closely.

This month’s MLMU also introduces a new vacancy series collated by Jobs and Skills Australia, which will be used in future issues to enhance our existing indicators of labour demand.