Australia’s jobs market has held up remarkably well through 2025 and into 2026, despite rising inflation, two consecutive interest rate hikes, and significant global uncertainty. But the headline numbers conceal important details about who is benefiting and where the pressure points are.
Here is what the most recent ABS data shows about the Australian labour market in 2026.
The Headline Numbers — Unemployment in 2026
According to the Australian Bureau of Statistics Australia’s seasonally adjusted unemployment rate stood at 4.1 per cent in January 2026 before rising to 4.3 per cent in February 2026 — the highest reading since November 2025. The February rise reflected an increase in the number of unemployed people by 35,000 to 659,100, even as total employment climbed 48,900 to a new record high of 14.75 million.
The participation rate — the share of working-age Australians either in work or actively looking for work — rose to 66.9 per cent in February 2026, a four-month high. This is a significant figure because a higher participation rate means more Australians are engaged with the labour market, which is a sign of confidence in job availability.
ABS head of labour statistics Sean Crick noted in January 2026 that full-time employment rose by 50,000 people in that month alone — a strong signal that businesses were committing to stable headcount rather than relying on casual or part-time arrangements.
What 4.3 Per Cent Unemployment Actually Means
To put the February 2026 unemployment rate in context: before the COVID-19 pandemic, Australia’s average unemployment rate sat around 5.2 per cent. The current 4.3 per cent, while up from recent lows, remains significantly below the pre-pandemic average and well below the levels seen during the 2008 financial crisis when unemployment reached 5.8 per cent.
The RBA forecasts the unemployment rate will rise to approximately 4.4 per cent through 2026, reflecting the dampening effect of higher interest rates on economic activity. Whether that forecast proves accurate will depend significantly on how household spending and business investment respond to the dual pressure of higher borrowing costs and elevated living costs.
Underemployment — The Number That Matters as Much as Unemployment
The unemployment rate measures people who have no work at all. Underemployment measures something equally important — people who have some work but want more hours than they are currently getting.
According to ABS data, the underemployment rate was 5.9 per cent in February 2026. Combined with the unemployment rate of 4.3 per cent, the total labour underutilisation rate sits at approximately 10.2 per cent. This means roughly one in ten Australians who are either working or looking for work are not getting the employment they want.
Youth underemployment is particularly notable. In January 2026, the ABS recorded youth underemployment at 14.8 per cent for Australians aged 15 to 24 — meaning nearly one in seven young Australians in the labour force wanted more work than they could find.
Job Vacancies — Plenty of Jobs Still Unfilled
Despite the slight uptick in unemployment, job vacancies remain elevated by historical standards. According to ABS Job Vacancies data or February 2026, job vacancies increased 2.7 per cent — representing approximately 8,900 additional vacancies — in the three months to February 2026. The vacancy rate sits at approximately 2.0 per cent, compared to the 2010 to 2019 historical average of 1.4 per cent.
It is worth noting that job vacancies are still 28.6 per cent lower than their peak in May 2022, when the post-pandemic hiring surge pushed vacancies to record levels. The current level represents a significant normalisation from that extreme, while still remaining above pre-pandemic norms.
According to Hays recruitment’s 2026 report, the roles in highest demand relative to available supply include accountants, teachers, engineers, cyber security specialists, and software developers. Skills shortages remain acute in health, education, construction, and trades according to Jobs and Skills Australia.
Hours Worked — A Record High
One of the most significant indicators of labour market health is total hours worked across the economy. In early 2026, monthly hours worked in all jobs reached approximately 2,013 million hours — a record high according to ABS data. This figure matters because it reflects sustained workforce engagement and genuine demand for labour, not just statistical noise in headcount numbers.
When total hours worked are rising alongside a steady participation rate, it indicates that the labour market is absorbing workers productively rather than simply cycling people through short-term roles.
Wages Versus Inflation — The Real Picture
Employment data does not exist in isolation from living costs. Australia’s Wage Price Index grew 3.4 per cent in the year to December 2025 — a solid nominal figure, but one that sits slightly below CPI inflation of 3.7 to 3.8 per cent over the same period. In real terms, most Australian workers experienced a modest decline in purchasing power despite the strong jobs market.
The healthcare and social assistance sector recorded the strongest wage growth at 4.4 per cent annually — the only major sector where wages clearly outpaced inflation. Industries including retail trade, arts and recreation, and professional services saw more modest gains that did not keep pace with price rises.
For more on the wages picture, see our detailed coverage of are Australian wages keeping up. For broader cost of living context, see our 5 things getting more expensive.
The Impact of the Middle East Conflict on Jobs
The escalation of the Middle East conflict in late February and March 2026 has introduced new uncertainty into Australia’s employment outlook. Commonwealth Bank economists noted in late March 2026 that household spending data showed consumers cutting back on discretionary categories — food, household goods, and recreation — while fuel spending rose sharply. If this pattern of budget reallocation persists, it could dampen demand in retail, hospitality, and services sectors — all of which are significant employers of lower-wage workers.
Oxford Economics, in its modelling of a prolonged conflict scenario, projected Australian GDP could contract in the June and September quarters of 2026 — which would put upward pressure on unemployment. That remains a tail risk scenario rather than a central forecast, but it is the kind of external shock that can move labour market conditions quickly.
For more on how the conflict is hitting household budgets, see our how the Middle East war is hitting Australian household budgets.
Where Australia’s Jobs Market Stands in 2026
Based on the most recent ABS data, Australia’s labour market remains resilient by historical and international standards. Unemployment at 4.3 per cent, participation at 66.9 per cent, total employment at a record 14.75 million, and hours worked at a record 2,013 million hours per month — these are strong foundations.
The pressures are real but manageable at present. Underemployment at 5.9 per cent, youth underemployment at 14.8 per cent, and real wages declining slightly despite nominal growth of 3.4 per cent are the areas where the data points to genuine stress for working Australians.
The next key data release to watch is the March 2026 Labour Force figures, due from the ABS on 16 April 2026, which will provide the first read on how the Middle East conflict and the March RBA rate hike have affected employment conditions.
This article is for general informational purposes only and reflects the author’s own research and understanding of publicly available data. It does not constitute financial or employment advice. Data was accurate at the time of writing — always verify current figures directly with the ABS and the Department of Employment and Workplace Relations.
