41856 – Employment and the Labour Market | Australian Property Network™

41856 — Employment and the Labour Market

Overview

The labour market is where the economy meets most households. Whether people have work, how many hours they get, and how easily they can change jobs determine incomes more directly than any other variable, and the unemployment rate is the figure by which most Australians judge whether the economy is doing well. It is also, with inflation, one of the two objectives the Reserve Bank of Australia (RBA) is legally required to pursue.^4,5

This entry explains how employment and unemployment are measured, what participation means and why it has risen for fifty years, the difference between the number of people employed and the number of jobs, and what the record since 1978 shows. It closes on what the labour market means for property: unemployment is the main reason mortgages default, and job growth is what fills new dwellings.

Scope & Boundaries

This entry covers:

The definitions: employed, unemployed, the labour force, the participation rate, and underemployment
The three types of unemployment and the idea of full employment
The Australian record: unemployment and participation from 1978, filled jobs from 1994
The labour market’s place in the inflation and interest-rate cycle
What employment conditions mean for mortgage risk and housing demand

This entry does not cover:

Wages and real incomes — addressed in 41854
Productivity, or output per hour worked — addressed in 41853
Economic growth and GDP — addressed in 41855

Scope Note

This entry is educational background within an editorial essay series. Its charts use the Australian Bureau of Statistics Labour Force survey and Labour Account, cited in full at the end of the page. APN’s certified readings of Australian labour-market conditions are maintained separately in the 21200 series.

Key Concepts

The definitions

The ABS Labour Force survey classifies every person of working age into one of three groups. The employed are those who did at least an hour of paid work in the survey week, or were on leave from a job. The unemployed, in the RBA’s summary, are “people who are not in a paid job, but who are actively looking for work” and are available to start. Everyone else, students, retirees, carers, and those who have stopped looking, is outside the labour force. The labour force is “the sum of employed and unemployed people”; the participation rate is “the percentage of people in the working-age population that are in the labour force”; and the unemployment rate is “the percentage of people in the labour force that are unemployed”.² Because the unemployment rate is a share of the labour force, not of the population, it can fall when discouraged workers stop looking, and rise when a strong market draws people back in, which is why the participation rate must be read alongside it.

Chart 1

Unemployment rate, seasonally adjusted, monthly, February 1978 to July 2026 (per cent)

Source: ABS Labour Force, Australia, Table 1, unemployment rate, persons, seasonally adjusted.

The unemployment record

The series begins at 6.6 per cent in February 1978. The recession of 1982–83 took it to 10.5 per cent, and the recession of 1990–91 to the series high of 11.2 per cent in December 1992. The long expansion that followed brought it down for fifteen years, to a low of 4.0 per cent in February 2008, before the global financial crisis lifted it to nearly 6 per cent. Through the 2010s it sat between 5 and 6.5 per cent, averaging 5.5. The pandemic produced the fastest rise in the series, to 7.4 per cent in July 2020, and then the fastest fall: by October 2022 unemployment was 3.4 per cent, the lowest since the early 1970s and below any reading in this series. It has drifted up since as interest rates slowed the economy, to 4.5 per cent in July 2026, but the average since the start of 2022, 4.0 per cent, remains below every previous decade.^1,6

Chart 2

Participation rate, seasonally adjusted, monthly, February 1978 to July 2026 (per cent of the working-age population)

Source: ABS Labour Force, Australia, Table 1, participation rate, persons, seasonally adjusted.

Participation

Participation is the quiet structural story of the Australian labour market. In 1978, 61.2 per cent of the working-age population was in the labour force; in July 2026 the figure was 66.9 per cent, and it peaked at 67.2 per cent in January 2025. Almost all of the rise is women’s participation, with a smaller contribution from older workers staying on past 65; both were partly offset by longer time in education and by population ageing, which pulls the aggregate down as the share of retirees grows. The pandemic is visible as the sharp drop to 62.2 per cent in May 2020, when people who lost work were not counted as unemployed because they were not looking, and as the equally sharp recovery. A rising participation rate means the economy has to create jobs faster than population growth alone would require just to hold unemployment steady, which is what it did through 2022–25.^1,6

Chart 3

Filled jobs, all industries, seasonally adjusted, quarterly, September 1994 to June 2026 (millions)

Source: ABS Labour Account, Australia, Table 1, filled jobs, seasonally adjusted. The Labour Account counts jobs rather than people: a person with two jobs is counted twice.

Jobs versus people

The Labour Force survey counts people; the ABS Labour Account counts jobs, and the two differ because a growing share of workers hold more than one. In the June quarter of 2026 there were 16.3 million filled jobs held by 15.2 million employed people, so about a million jobs were secondary jobs.³ Filled jobs have risen from 8.7 million in September 1994 to 16.3 million, an increase of 87 per cent, well ahead of population growth over the same period, which is the participation story again in a different measure. The pandemic quarter is the only large break: 850,000 jobs disappeared between the December quarter of 2019 and the June quarter of 2020, and all of them had returned within a year.³

Types of unemployment and full employment

The RBA distinguishes three kinds of unemployment. Cyclical unemployment “occurs with changes in economic activity over the business cycle”: people laid off in a downturn and rehired in a recovery. Structural unemployment “occurs when there is a mismatch between the jobs that are available and the people looking for work”, because skills or locations do not line up. Frictional unemployment “occurs when people move between jobs in the labour market, as well as when people transition into and out of the labour force”.² The last two never fall to zero, so “full employment” does not mean zero unemployment; it means the lowest rate at which the economy can run without inflation accelerating. That rate is not observable and is estimated, and the experience of 2022–23, when unemployment of 3.5 per cent coincided with the fastest inflation in three decades, is the reason most estimates put it somewhere above 4 per cent. The labour market enters the RBA’s decisions through this channel: unemployment below full employment signals demand-pull inflation ahead, and unemployment above it signals room to ease.⁷

Regulatory & Legal Framework

Full employment is a statutory objective. Section 9B of the Reserve Bank Act 1959 (Cth) directs the Monetary Policy Board to set policy “in a manner that it believes best contributes to both price stability and the maintenance of full employment in Australia”, and the Statement on the Conduct of Monetary Policy treats the two as equal objectives to be balanced over time rather than a hierarchy.^4,5 The Board therefore reads the monthly Labour Force release, published by the ABS about two weeks after the end of the reference month, as closely as it reads the CPI.¹

The labour market itself is governed by the Fair Work Act 2009 and the award and agreement system described in 41854, and by Commonwealth income support: JobSeeker and related payments set the floor beneath which an unemployed person’s income cannot fall, and their level relative to wages affects how quickly people take jobs. Migration policy is the other major lever, because it sets the growth of the working-age population that the labour market has to absorb; the post-2022 surge in net overseas migration is the main reason participation and employment could both rise while the unemployment rate also drifted up.

Practical Application

Mortgage risk. Loss of income is the leading cause of mortgage default, and unemployment is the main way income is lost. This is why lenders price and regulators watch the unemployment rate above almost any other variable: a rise of one percentage point means roughly 150,000 more people out of work, a share of whom have mortgages. The low and stable unemployment of 2022–26 is the main reason the fastest rate-tightening cycle in the series produced so little mortgage stress; the risk to housing from a downturn runs through jobs, not through rates directly.

Housing demand. Jobs fill dwellings. Regions with job growth draw population and see rents and prices rise; regions that lose an employer see the reverse, which is why the closure of a single large employer in a regional town moves that town’s market more than any change in the cash rate. The state-level and regional labour force figures in the ABS release are the leading indicator for local rental demand.

Reading the release. The monthly unemployment rate is sampled and moves by a tenth or two for reasons that have nothing to do with the economy; the ABS itself advises against reading a single month. The three-month average, the direction of participation, and the split between full-time and part-time employment are more informative. A rising unemployment rate with rising participation is a strong labour market absorbing new entrants; a falling rate with falling participation is a weak one shedding them.¹

Cross-Series References

41854

Wages and Real Incomes

What happens to pay when the labour market is this tight, and whether it beats inflation.

41855

Economic Growth and GDP

Why jobs kept rising while output per person fell, and what that combination means.

41851

Interest Rates: The Price of Money

How the RBA weighs unemployment against inflation when it sets the cash rate.

21200

Economic Factors

APN’s certified readings across the economic indicators, updated as each release lands.

Sources

1. Labour Force, Australia — Australian Bureau of Statistics
2. Unemployment: Its Measurement and Types — Reserve Bank of Australia, Explainer
3. Labour Account, Australia — Australian Bureau of Statistics
4. Monetary Policy Board — Reserve Bank of Australia
5. Reserve Bank Act 1959 (Cth) — Federal Register of Legislation
6. Labour Force, Australia, Table 1, Labour force status by sex (unemployment rate and participation rate, seasonally adjusted) — Australian Bureau of Statistics
7. Causes of Inflation — Reserve Bank of Australia, Explainer

This entry is part of the Understanding Money editorial essay series and is presented for general educational context. APN’s certified readings of Australian economic conditions are maintained in the 21200 Economic Factors series.

41856 – Employment and the Labour Market