Key Highlights

• Employment growth held up in the September quarter, in line with RBA forecasts.

• Unemployment rose to 4.6%, largely from higher labour supply.

• Housing prices have fallen more than expected, while Business Credit growth is encouraging.

• The RBA judges financial conditions to be restrictive, with cross-currents.

Beneath a higher Unemployment rate, the Reserve Bank's latest assessment contains a reassuring detail: hiring kept pace with its expectations through the September quarter.

Headlines about the labour market in recent weeks have tended to focus on one figure: the unemployment rate of 4.6 per cent in the September quarter. It was higher than the Reserve Bank of Australia (RBA) had expected, and it fed into a forecast that sees joblessness rising to a bit over 5 per cent by end-2028.

Read the RBA's November 2026 Statement on Monetary Policy closely, though, and a quieter phrase stands out. In the Economic Conditions chapter, the bank says "employment growth held up in the September quarter as expected". That short clause changes the tone of the story considerably.

Jobs growth versus the jobless rate

It is easy to treat employment and unemployment as mirror images, where one goes up only when the other goes down. In practice, they can move in the same direction at the same time.

Employment counts the people who have jobs. The unemployment rate measures the share of the labour force, those working plus those actively looking, who are without work. If more people join the labour force than there are new jobs created in a given period, the unemployment rate can rise even while employment grows.

That is broadly what the RBA describes for the September quarter. The bank says the rise in unemployment largely reflected higher-than-expected labour supply. Employers were still adding to their workforces at the pace the RBA had forecast. What changed was the number of people available and searching for work.

From the perspective of a household, that is meaningfully different from a quarter in which firms are laying off staff. A labour market where employment is growing at the expected rate is one in which jobs are still being created.

Why the detail matters to the RBA

For the Monetary Policy Board, the composition of the labour market matters because it bears on inflation. A sudden collapse in hiring might signal that Demand in the economy is weakening sharply, which would tend to reduce pressure on prices. Steady employment growth suggests demand for workers remains intact.

That context helps explain why the Board did not see the higher unemployment rate as a reason to hold. On 3 November, it lifted the cash rate target by 25 basis points to 4.85 per cent. Its statement read: "At its meeting today, the Board decided to increase the cash rate target by 25 basis points to 4.85 per cent." It added that "the Board judged that a further tightening in financial conditions is warranted".

Inflation remains the priority. Over the year to the September quarter, headline Inflation was 3.9 per cent and trimmed mean, or underlying, inflation was 3.7 per cent. The monthly CPI indicator, a separate headline series, showed 4.3 per cent annual inflation in the September month. The Board's statement noted: "Inflation is now forecast to remain elevated through much of 2027".

Governor Michele Bullock, at her media conference, said: "Returning inflation to target is our priority, and we will do what is necessary to achieve that."

The vote was split, with six members supporting an increase and three preferring to keep the cash rate at 4.60 per cent.

The broader economic backdrop

The resilience of employment sits against a slowing economy. The Economic Conditions chapter notes that GDP growth "has slowed this year to a little below its potential growth rate". The RBA's forecasts show year-ended GDP growth easing from 2.1 per cent in June 2026 to 1.6 per cent in December 2026 and June 2027, then to 1.3 per cent by December 2027 and June 2028.

Other parts of the economy are sending mixed signals. The Financial Conditions chapter says "housing prices have declined by more than expected", while business credit growth remains very encouraging. The RBA judges financial conditions overall to be "restrictive, but with various cross-currents".

In that environment, employment holding up is notable, though the RBA does not suggest it will last indefinitely. Its forecasts have unemployment rising gradually to 4.7 per cent by December 2026, 4.9 per cent by December 2027 and 5.1 per cent by December 2028.

The RBA's liaison program, which Deputy Governor Andrew Hauser said involves around 900 meetings a year, offers another window. In a 9 November speech on artificial intelligence, Assistant Governor (Economic) Sarah Hunter reported that around three-quarters of liaison firms reported no change to headcount, about 12 per cent slower hiring or not filling roles, about 8 per cent reducing headcount and around 6 per cent increasing it.

What the good news does not mean

The phrase "held up as expected" should not be over-read. It describes one quarter, measured against the RBA's own forecast. It does not mean the labour market is strengthening, nor that unemployment will stop rising.

Nor does steady employment offset the pressure many households face from higher prices and higher borrowing costs. The Financial Stability Review, published on 1 October, found that the share of variable-rate owner-occupier borrowers with a cash-flow shortfall "increased a little over the first half of 2026, but remains relatively low at around 2 per cent." Employment is one of the most important supports for borrowers' ability to keep up with repayments, which is why its resilience matters to financial stability as well as to monetary policy.

The FSR's broader assessment was that "Most borrowers appear well placed to manage ongoing cost pressures amid declining housing prices."

The bottom line

The September quarter's rise in unemployment to 4.6 per cent attracted attention, but the RBA's own reading is that employment growth held up as expected and that higher-than-expected labour Supply largely drove the higher jobless rate. That is a more resilient picture than the headline suggests, and it is one reason the Board judged further tightening warranted. The RBA still forecasts a gradual rise in unemployment as growth slows. The minutes of the November meeting, due on 17 November, may shed more light on how the Board weighed these signals ahead of its 8 December decision.