Why the RBA watches the jobs market so closely

Australia’s unemployment rate can look steady and still miss what many people are feeling in their week-to-week budget.

In August 2026, the unemployment rate rose to 4.6%, with around 14.8 million people employed.¹ That is still lower than before the pandemic, though it is the highest rate since late 2021. But having a job does not always mean having enough hours, enough income, or enough confidence to spend freely.

That is where underemployment becomes important. In August 2026, the underemployment rate was 6.2%¹, meaning some Australians had work but wanted more of it. For casual workers, contractors or people relying on shifts, that gap can matter more than the headline unemployment rate itself.

Hours worked add another layer. In August 2026, monthly hours worked increased to around 2,009 million hours in seasonally adjusted terms.¹ When employment and hours are both rising, the labour market usually looks stronger than when jobs are growing but hours are flat.

The RBA looks beyond the unemployment figure alone. Hours worked, wages, job vacancies and workforce participation all help paint a clearer picture of whether the labour market is still holding up or whether pressure is starting to build beneath the surface.

Employment data is not only about how many people have jobs. It is also about how secure those jobs feel.

A household with steady work may feel comfortable planning ahead, booking a holiday, replacing the car, renovating, or simply saying yes to a few extra expenses. A household worried about job cuts, fewer shifts, or slower business may start pulling back before their income changes.

That caution can spread through the economy. If workers in one industry see hiring slow, they may spend less. If businesses notice customers becoming more careful, they may adjust staffing, stock levels or prices.

Employment is a useful signal for the RBA because it shows not only what people are earning now, but how confident they feel about the months ahead.

By the time the RBA meets to decide on interest rates, it has already looked at far more than inflation alone. Employment is part of that picture because it helps show whether the economy still has momentum or is starting to lose speed.

A strong job market can support household spending, especially if wages and hours are also holding up. If inflation is still high at the same time, the RBA may see that as a sign that demand remains firm.

A softer job market can point in a different direction. If hiring slows, hours fall or unemployment starts to rise while inflation is easing, it may suggest households and businesses are already pulling back.

One jobs report will not decide a cash rate move on its own. Employment is one part of a wider picture that includes inflation, spending, wages, business conditions and global risks.

Employment is one of the most relatable economic indicators because it connects directly to people’s lives.

It shows whether Australians feel secure, whether wages are keeping up, whether businesses are still hiring, and whether households have enough confidence to keep spending.

For everyday Australians, that matters because interest rate decisions are not made in isolation. Inflation may get most of the attention, but the jobs market helps show how much pressure is sitting behind the numbers.

A steady labour market can suggest the economy still has momentum. A softer one can point to households and businesses becoming more cautious, often before that shift shows up more broadly across the economy.