Unemployment rate rises to 4.1%

The unemployment rate has increased through the January period – reinforcing the importance of this week’s interest rate cut.

The latest data from the Australian Bureau of Statistics (ABS) has revealed that the unemployment rate for January has increased by 0.1 percentage points from the previous month – drawing the number to 4.1 per cent.

“With employment rising by 44,000 people and the number of unemployed increasing by 23,000 people, the unemployment rate rose to 4.1 per cent,” said Bjorn Jarvis, ABS head of labour statistics.

“The rises in both the number of people employed and unemployed saw the participation rate rise by 0.1 percentage point, to a new record high of 67.3 per cent. This was 0.8 percentage points higher than a year ago and 1.8 percentage points higher than in March 2020.

“The number of employed people grew by 0.3 per cent in January 2025, the same pace as the average monthly rise in 2024, but higher than the average monthly population growth of 0.2 per cent during 2024.”

According to the ABS, some of the increases in unemployment are reflected in a wide range of Australians with jobs waiting around to either return to work or begin employment in January.

“As in the past three Januarys, in January 2025, we again saw more people than usual who had a job but were waiting to start or return to work,” said Jarvis.

The data also highlighted that monthly hours worked fell by 0.4 per cent in January 2025 – reflecting a higher-than-usual number of Australians working fewer hours in January. However, this was less so than in recent Januarys.

“The fall in seasonally adjusted hours worked in January 2025 is the smallest we’ve seen over the past five Januarys, and much more in line with what we have seen in the past, before the pandemic,” Jarvis said.

Speaking on the current employment landscape, Ben Thompson, chief executive of Employment Hero, explained that as the new year kicks off, Aussie businesses are hitting the reset button.

“After the holiday hiring rush, businesses are hitting reset. Wage and employment growth are stalling, while hours are plummeting, highlighting the immense pressure on SMEs and employees alike,” Thompson said.

According to Employment Hero data, poly employment can be pinpointed as a key driver for employment growth – arguing that Aussies are jumping on the trend merely to stay afloat.

“Latest [Employment Hero] data shows employment growth at 6.8 per cent YOY, but a deeper look reveals this spike was driven by casual hires, while full-time growth slowed,” Thompson said.

Average hours worked dropped 6.1 per cent YOY, with casual roles hit hardest (-27.2 per cent), suggesting a trend of poly-employment, where Australians are juggling multiple jobs to stay afloat.

Despite the relief of the Reserve Bank of Australia interest cuts, Thompson believes that high costs are continuing to hamstring businesses – sustaining it as a critical issue ahead of the upcoming federal election.

“Wage growth cooled to 4.3 per cent year over year in January, down from an 8.8 per cent peak in August 2024, with month-on-month growth slipping 2 per cent from December,” he said.

“As high costs continue to strain Australians and businesses prioritise flexible hiring over full-time commitments, employment will remain a critical issue ahead of the election – despite the RBA’s rate cut offering some relief.”