BCEC Monthly Labour Market Update – July 2026

• National unemployment rate essentially unchanged, but rounding pushes the headline figure up from 4.4 per cent to 4.5 per cent.
• Modest decline in employment marks a solid outcome given the surge in jobs in previous month’s figures.
• Results impacted by a suspiciously large fall in employment in Western Australia.

Labour market steady following previous month’s strong employment gains

Much of the interest in July’s Labour Force Survey figures lay in what they might tell us about June’s surprise 76,300 surge in jobs: was it a statistical aberration or is labour demand picking up again? In the end it was a solid result as the labour market held on to most of those gains. The number of people employed fell back by just 15,800 and all the jobs lost were in part-time roles. The number of persons employed full-time actually increased by a further 16,300 on top of a jump of almost 50,000 in the June numbers.

While headline unemployment increased from 4.4 per cent to 4.5 per cent, the rate essentially remained unchanged. Declines in participation rates for men (-0.2ppt) and women (-0.1ppt) largely offset the fall in jobs. To be precise, the estimate of the unemployment rate increased from 4.43 per cent to 4.46 per cent – an insignificant change in the context of sampling variability in the estimates.

July’s figures are broadly in line with the Reserve Bank of Australia’s (RBA’s) outlook for the labour market, and won’t have anybody revising their expectations on monetary policy. Annual employment growth is currently running at 1.3 per cent, compared to RBA forecasts for growth to pick up to 1.4 per cent by the December quarter. The unemployment rate is so far neatly following a rise from 4.4 per cent last quarter to a forecast average of 4.5 per cent over the December quarter.

But these latest data invite at least one note of caution.

July’s outcome would have looked stronger had it not been for a suspiciously large deterioration in the estimates for Western Australia. WA saw a 23,900 decline in the number of employed persons, and a rise in the State’s unemployment rate from 4.2 per cent to 4.4 per cent despite the participation rate tumbling a full percentage point to 68.0 per cent.

That equates to a 1.4 per cent fall in employment in a single month. To put that in context, it’s the fourth largest monthly drop in almost 50-years of the current labour force survey for WA, eclipsed only by two COVID-19 impacted months of April and May, 2020, and January 2009 in the wake of the Global Financial Crisis. It also marked the fourth largest drop in the participation rate in a single month.

These estimates may be a sign of some deterioration in the state of WA’s labour market, a statistical aberration, or some combination of the two. We’ll be watching closely for answers in the August figures.

The national figures for July also show an increase of 37,100 in the ABS estimate of the civilian working-age population. From other sources, we estimate that only around 14,000 of that increase is due to 14 year olds turning 15 and moving into working age, with much of the balance attributable to net overseas migration. This is significant as the estimated increase remains constant for each month in the quarter, so the ABS will assume the same increase in August and September, up from growth of 28,200 people in each month during the June quarter. Despite the evident demand for skilled workers, these increases will no doubt add fuel to the political debate on immigration numbers.

The wage dilemma deepens

Recent updates on two key wage data series show real wages to have fallen over the year to the June quarter – down by 0.7 per cent based on the Wage Price Index (WPI) and by 0.3 per cent for average weekly earnings (AWE). That’s a result of inflation picking up through the first half of 2026 and wage rises not keeping pace.

This presents an ongoing challenge for a government that came to office on the promise of getting real wages moving again. The WPI is now down by 1.5 per cent in real terms since the June 2022 quarter, when the Albanese Labor government was elected. Neither does the AWE series offer any more encouragement, having risen by a meagre 0.8 of a per cent in real terms over the same period.

Following their recent August meeting, the RBA Governor noted the Monetary Policy Board only discussed the options of keeping rates on hold or raising them, with no consideration given to cutting rates. Unless there is a marked improvement in labour productivity, a pick-up in nominal wages sufficient to restore real wage growth will add to inflationary pressures and the likelihood of a further rate rise, or at least keep rates high for longer.