Breaking: Australian Unemployment Rate Hits 4.3% in July

Unemployment rate Australia has significantly surpassed market forecasts, rising to 4.3% in June 2025 and ending five months of stability at 4.1%. This unexpected increase marks the highest jobless rate since November 2021, with the number of unemployed people growing by 33,600 to reach 659,600.

Meanwhile, employment figures showed minimal growth with only 2,000 new jobs added to the workforce, falling well short of the projected 20,000 increase. The current Australian unemployment rate reveals a concerning trend as full-time employment decreased by 38,200 positions, though this was offset by a rise in part-time work, which increased by 40,200 jobs. Furthermore, unemployment in Australia appears to be accompanied by growing underemployment, which ticked up to 6.0% from the previous month’s 5.9%. The participation rate also edged higher to 67.1%, slightly above both the May figure and market expectations of 67.0%, according to the ABS.

Australia’s Unemployment Rate

The Australian labour market has taken a significant downturn as new data reveals the unemployment rates climbed sharply in July. According to the Australian Bureau of Statistics the jobless rate reached 4.3%, marking a concerning 0.2 percentage point increase from June’s figure of 4.1%.

ABS Confirms Highest Rate Since November 2021

The latest labour force data confirm that the Australian unemployment rate has hit its highest level in over three and a half years. This substantial rise represents the first time since late 2021 that unemployment in Australia has exceeded 4.2%, indicating a potential reversal of the strong labour market conditions that had prevailed following the pandemic recovery period.

The deterioration in employment conditions appears to be accelerating, with the number of officially unemployed Australians jumping by 33,600 in July alone. This sharp increase has occurred despite modest overall employment growth, with only 2,000 new jobs added during the month. Nevertheless, this minor increase fell dramatically short of economists’ projections, which had anticipated approximately 20,000 additional positions.

Youth unemployment has been particularly affected, with the rate for those aged 15 to 24 years surging from 9.5% to 10.4% in July. This demographic has experienced its highest unemployment level since November 2021, suggesting younger workers are bearing the brunt of the cooling labour market.

Callam Pickering, Asia-Pacific economist at job site Indeed, noted: “Australian employment has stalled in recent months, with the unemployment rate spiking to its highest level since November 2021”. Additionally, Innes Willox, Chief Executive of the Australian Industry Group, characterised the rise as “a consequence of our weak private sector labour market”.

Market Expectations Missed

The Australian unemployment rate figures have substantially deviated from market forecasts, catching many economists off guard. Prior to this release, market analysts had consistently predicted more positive labour market outcomes for six consecutive months, underestimating the speed at which conditions were deteriorating.

Subsequently, the Reserve Bank of Australia (RBA) now faces increased pressure to reconsider its monetary policy stance. Notably, the central bank had previously forecast that unemployment in Australia would reach 4.3% by the end of the year. Still, this level has been achieved months ahead of schedule, potentially indicating that economic conditions are weakening faster than anticipated.

The rising unemployment has coincided with other concerning labour market indicators. The participation rate in July increased slightly to 67.1%, just shy of its record high of 67.2% in January. However, this record participation occurred alongside a noticeable shift in employment composition, with full-time jobs decreasing by 38,000 while part-time positions increased by 40,000.

This unexpected shift in the Australian unemployment rate has raised concerns about broader economic conditions, particularly as it comes shortly after the RBA decides to keep interest rates on hold. For many analysts, this development suggests that previously stable labour market conditions may be unravelling more rapidly than anticipated.

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Full-time Jobs Fall as Part-time Employment Surges

The latest labour force data reveal a dramatic shift in employment patterns, revealing a substantial restructuring in the types of jobs available to Australian workers. This rebalancing between full-time and part-time employment suggests deeper changes in employer hiring strategies and workforce demand.

Full-time Employment Drops by 38,200

The July labour force data reveals a concerning decline in full-time positions across Australia. According to the ABS, full-time employment decreased by 38,200 to 10,063,200 people. This sharp reduction represents a significant reversal from the growth trend observed in previous months and indicates potential weakness in specific economic sectors.

Historically, between 1978 and 2023, more males than females have consistently been employed in full-time positions. The current decline may therefore have gender-specific impacts across the workforce. Although full-time employment has dropped in the short term, it remains substantially higher than the previous year, with earlier data showing full-time employment was 386,100 (or 4.1%) above the level recorded in July 2022.

The reduction in stable, full-time positions comes at a critical time when many Australians are facing increased cost-of-living pressures. Full-time roles typically offer greater income security and benefits compared to part-time positions, making this decline particularly significant for household financial stability.

Part-time Jobs Increased by 40,200

In contrast to the fall in full-time employment, part-time positions have shown remarkable growth. The ABS reported that part-time employment increased by 40,200 to 4,556,100 people in July. This substantial rise almost exactly counterbalances the drop in full-time positions, explaining why the overall employment figures showed minimal net change.

This surge in part-time work continues a trend identified by KPMG analysis, which found an extra 200,000 workers were working part-time in 2024, increasing the proportion of Australian part-timers to 30.9%. After a temporary decline during the pandemic, when part-time workers made up 30.3% of the workforce (the lowest level since 2013), the long-term shift toward part-time employment appears to have resumed.

Shift in Job Type Signals Changing Labour Demand

The simultaneous decrease in full-time positions and increase in part-time roles points to fundamental changes in Australia’s labour market structure. This transformation may reflect employers’ preference for more flexible staffing arrangements amid economic uncertainty.

Certain industries are driving this shift more than others. The healthcare industry, including aged care, has underpinned the growth in part-time employment over 2024. In 2019, twenty per cent of part-time workers were seen in the healthcare industry, which had grown to 22% by 2024. Additionally, the accommodation and food services industry recorded the highest share of part-time workers at 60.5%, followed by retail at 50.6% and arts and recreation at 46.1%.

Geographically, the coastal region between Sydney and Brisbane has emerged as a part-time employment hotspot, with almost 40% of its workforce in part-time positions. Conversely, industries like mining maintain predominantly full-time workforces, with 95% of mining workers in full-time positions.

The ABS has advised that “the strength of total hours worked over the past year, relative to employment growth, shows the demand for labour is continuing to be met, to some extent, by people working more hours”. This suggests that rather than creating new full-time positions, employers may be extending hours for existing workers or creating part-time roles to meet demand.

Essentially, this restructuring of Australia’s workforce composition may have long-term implications for wage growth, job security, and economic stability as the current Australian unemployment rate continues to evolve.

Participation Rate and Underemployment Edge Higher

Beyond the headline unemployment figures, deeper labour market indicators have shown concerning movements in July. Both participation and underemployment metrics have edged higher, revealing additional pressures within the Australian workforce.

Participation Rate Rises to 67.1%

The labour force participation rate increased marginally in July to 67.1%, up from 67.0% in the previous month. This figure remains close to its record high and reflects continued strong workforce engagement across the country. Remarkably, the participation rate has reached or exceeded 67% only ten times since records began, with all these occurrences taking place during the current government’s term.

The rising participation rate suggests more Australians are actively seeking employment or increasing their work hours. Yet, as Martin Herbst, CEO of JobAdder, points out, “A rise in both unemployment and participation is a sign of growing job seeker confidence, but also a sign that hiring demand hasn’t caught up.”

Underemployment Ticks up to 6.0%

Simultaneously, the underemployment rate has increased to 6.0% in July, up from 5.9% in June. This uptick indicates a growing number of employed Australians who desire more working hours than they currently have. In absolute terms, this represents approximately 915,100 underemployed individuals across the nation.

This modest rise continues a concerning trend, as underemployment had already climbed by 0.4 percentage points over the past year. Even so, current levels remain significantly lower than during the early pandemic period of March 2020.

Broader Labour Market

Taken together with the Australian unemployment rate, these metrics paint a more complex picture of labour market health. The combined labour underutilisation rate—which encompasses both unemployed and underemployed workers—has now risen to 10.3%. This translates to approximately 1,574,700 Australians who are either without work or seeking additional hours.

The employment-to-population ratio, which measures employment relative to the population size, has held steady at 64.2%. This stability, amidst rising participation and unemployment rates, indicates that while more people are entering the workforce, job creation is not keeping pace with this increased supply of labour.

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Monthly Hours Worked Decline

Latest labour market data reveals a surprising reversal in Australia’s employment trends. The total number of hours worked significantly decreased in July, coincidentally with the rising unemployment rate and other concerning shifts in employment patterns.

Total Worked Hours Fall by 19 Million

The ABS reported a substantial reduction in total hours worked across the economy, with a decline of 19 million hours in July. This sharp drop contrasts markedly with previous data that showed hours worked had increased by 3.9 million hours to 1,952.0 million hours in July 2023. That earlier period had demonstrated robust growth, with total hours worked standing 5.2% above the level recorded a year prior.

Throughout 2023, the strength of total hours worked relative to employment growth indicated that labour demand was being met by existing workers increasing their hours. Consequently, the current reversal suggests employers may now be cutting back on employee hours as economic conditions deteriorate.

This pattern aligns with historical trends identified by the Reserve Bank of Australia, which noted that “since the late 1990s, a larger share of labour market adjustment in Australia has come about via changes in average hours worked, as opposed to changes in the number of people employed”.

Impact on Productivity and Economic Output

The decline in hours worked has significant implications for Australia’s productivity metrics and broader economic performance. Historically, productivity growth accelerated during the start of the pandemic as hours worked reduced faster than production. However, recent data shows a different dynamic may be at play.

Overall, productivity has decreased in the three years leading up to June 2023. The current unemployment rate in Australia, combined with decreasing hours worked, suggests the economy may be experiencing challenges similar to previous downturns.

External factors potentially contributing to this productivity decline include lingering effects of global supply chain disruptions, Russia’s invasion of Ukraine impacting energy markets, and weather-related constraints affecting construction, mining and agricultural industries. Moreover, economic analysis indicates that early labour market impacts from significant disruption tend to manifest first in hours worked, often preceding job losses.

Comparison to Historical Unemployment Trends

Historical context provides a crucial perspective for assessing Australia’s current labour market conditions, as the unemployment rate continues its upward trajectory.

Long-term average vs current rate

Despite recent increases, Australia’s current unemployment rate of 4.3% remains below the long-term historical average of 6.55% recorded between 1978 and 2025. At present, unemployment figures are significantly lower than the all-time high of 11.20% reached in December 1992, yet they have climbed from the record low of 3.40% achieved in July 2022.

The gradual rise from recent post-pandemic lows represents a concerning reversal after several years of improvement. Yearly averages clearly indicate this shifting pattern—unemployment in Australia registered at 4.07% for 2024, up from 3.67% in 2023 and 3.73% in 2022. Nonetheless, these rates remain considerably below the figures seen throughout much of the 2010s, when unemployment in Australia typically ranged between 5 and 6%.

Youth Unemployment and other Demographic Insights

Young Australians face substantially more challenging labour market conditions than the broader population. Currently, youth unemployment stands at 9% – more than double the national rate. Throughout 2024, this figure has worsened, reaching 9.47%, which represents a 1.1% increase from 2023 levels.

Expert Commentary on Structural Shifts

Economic experts highlight profound structural changes underlying current unemployment trends. Over three decades, Australia has undergone substantial economic transformation, with service sectors increasingly dominating employment opportunities.

Between 1994 and 2024, service industries expanded from 52.2% to 63.5% of total filled jobs. Concurrently, manufacturing experienced the most dramatic decline, shrinking from 13.3% to just 5.9% of employment. The healthcare sector emerged as the most significant growth area, nearly doubling its share from 8.6% to 16.5%.

This sectoral shift partly explains today’s employment challenges, as workers must increasingly adapt to an economy demanding different skill sets than previously required.

Conclusion – Australian Unemployment Rate

The Australian labour market faces significant challenges as unemployment figures continue their upward trajectory. Though the current 4.3% jobless rate remains below the long-term historical average of 6.55%, this sharp rise nevertheless signals concerning trends across multiple indicators. Undoubtedly, the dramatic restructuring between full-time and part-time employment represents a fundamental shift in workforce composition, with potential long-term implications for wage growth and job security.

Additionally, the combined labour underutilisation rate of 10.3% reveals substantial capacity for increased employment opportunities. This figure translates to approximately 1.57 million Australians either without work or seeking additional hours. Meanwhile, younger workers bear the brunt of deteriorating conditions, with youth unemployment surging to 10.4% – more than double the national rate.

The declining total hours worked, coupled with rising participation and underemployment rates, suggests more profound structural changes within the Australian economy. Specifically, the transition toward service-dominated employment continues to reshape workforce demands, requiring different skill sets than previously needed. Healthcare sectors have expanded while manufacturing has contracted significantly, creating adaptation challenges for many workers.

Overall, Australia’s labour market appears at a critical juncture. Despite remaining historically strong, multiple indicators point toward cooling conditions that warrant careful monitoring. The next few months will determine whether July’s jobless increase was a one-time blip or the start of a longer-term economic slowdown.