Unemployment falls in September, labour market still tight

The news: Australia's unemployment rate fell from 3.7% to 3.6% in September, surprising analysts who expected a steady result, while the increase in employment came in significantly lower than forecast.

The numbers: Roughly 6700 more people were employed than in August, undershooting analysts expectations of a 20,000 net employment gain. The participation rate fell to 66.7% from August's record high of 67.0%, but is still elevated compared to pre-pandemic levels. Underemployment edged lower to 6.4% in September, slightly higher than a year earlier but still roughly 2.4 percentage points lower than before the pandemic.

The context: Australia's tight labour market and resilient retail spending will put upward pressure on inflation and give the Reserve Bank more cause to consider hiking rates. The RBA said in its October minutes it had considered lifting the cash rate by 25 basis points this month, but decided the case for a hold at 4.10% was stronger.