BCEC Monthly Labour Market Update – November 2025

• Sharp drop in full-time employment of 56,500 persons in November, or 0.6 per cent
• Unemployment rate holds steady at 4.3 per cent due to a 0.4ppt fall in the male participation rate
• Softening employment growth may help stave off an early 2026 interest rate hike

Labour market continues to soften

With inflation surging back to 3.8 per cent in the 12 months to October, the strength of the Australian labour market toward the end of 2025 could well determine whether the first move in interest rates in 2026 will be up or down.

Announcing rates would remain on hold following Tuesday’s final meeting of the Monetary Policy Board for 2025, the accompanying media release observed ‘labour market conditions remain a little tight’. A sharp fall in full-time employment in November will allay some of that concern.

November estimates show total employment down 21,300 for the month, with a 35,200 increase in part-time positions partially offsetting the 56,500 fall in full-time jobs.

Males bore the brunt of the fall in full-time employment (down 40,500 positions). This was linked to a 0.4ppt fall in the male participation rate to 70.5 per cent, the lowest seen since the beginning of 2024.

The exodus of males from the labour force was largely driven by NSW, where the male participation rate fell 0.7ppt to 69.4 per cent as the male labour force shrank by 20,200. While not the ideal way to achieve it, that contributed to NSW now having the lowest unemployment rate of the states and territories, at 3.9 per cent.

Revisions to the labour force series also meant that employment has been growing marginally slower than previously estimated, with around 20,000 fewer jobs created in the 6 months to October. September’s jump in the unemployment rate to 4.5 per cent, after causing some alarm at the time, has been revised down to 4.4 per cent.

Other indicators for the month are consistent with loosening labour market conditions, with vacancies continuing to trend down, measures of under-utilisation rising, and aggregate hours worked falling.

The current increase in the working age population of 37,500 persons per month, driven primarily by migration, continues to outpace employment growth, which is trending up at 21,000 jobs per month. At current participation rates, that should lead to an increase in labour supply relative to demand, constraining wage rises.

Are interest rates heading up or down in 2026?

The Reserve Bank Monetary Policy Board next meet in early February.

They will get two updates on inflation before that meeting, with both the November and December monthly CPI figures to be released in January (the 7th and 28th, respectively).

They will have only the December labour force figures, due on the 22nd of January, to assess the direction of the labour market.

If there are no signs of inflation starting to moderate again, there is no doubt that the Board will increase the cash rate in February.

However, if the rate of growth in the CPI does start to ease back from 3.8 per cent towards the 2-3 per cent target range, the December labour force survey results may be key to how long the RBA feel they can afford to hold off on a rate rise.

A further deterioration in labour market conditions, on top of this month’s fall in full-time employment, may buy some extra breathing space.

Inflation aside, most key economic aggregates are falling in line with the RBA’s forecasts for the December quarter, including employment growth running at 1.3 per cent and the unemployment rate sitting marginally below the 4.4 per cent quarterly forecast.

The most recent Wage Price Index data show an annual increase of 3.4 per cent to the September quarter, which is also the RBA’s forecast for the December quarter. However, an uptick in annual wage rises negotiated in recent enterprise bargaining agreements to 4.2 per cent poses the risk of wages keeping a floor under inflation.

Plus, the ongoing population influx will add to price pressures, notably in the housing market.

While continued moderation in labour market conditions is expected, it’s unlikely the data for December will substantially reset the overall outlook. That means two surprisingly benign CPI figures in January will be needed to spare mortgage holders from a rate rise in February.