Australia's unemployment rate rose to its highest level in four and a half years in April, as a drop in female workforce participation weighed on the labor market.
The unemployment rate ticked up to 4.5%, marking its steepest level since November 2021, according to data from the Australian Bureau of Statistics (ABS). This exceeded market expectations of 4.3%, which would have matched March's rate.
The number of unemployed individuals grew by 33,000, while total employment dropped by 19,000, according to ABS head of labor statistics Sean Crick.
"Compared to what we usually see in April, more people remained unemployed this month," Crick said.
The decline in overall employment was primarily driven by a significant drop in female workers, with full-time positions falling by 19,000 and part-time roles shrinking by 13,000.
"This is the first fall in female employment since August 2025," Crick said.
The rise in unemployment comes amid broader economic pressures stemming from the war in the Middle East, which has dampened demand, weakened consumer sentiment, and driven up commodity costs, particularly fuel and oil prices.
According to a private survey from S&P Global, Australia's private sector contracted for the second time in three months. The S&P Global Flash Australia PMI Composite Output Index fell back into contraction territory below the neutral 50.0 threshold, slipping to 47.8 in May from 50.4 in April.
A slump in hiring was a major catalyst for the decline, with jobs across both the manufacturing and services sectors shedding at their fastest pace in more than five and a half years.
Meanwhile, underemployment slipped to 5.8% in April from the prior month's 5.9%, while the participation rate decreased month on month to 66.7% from 66.8%.
However, the working hours rose 0.9% to 15.8 million hours.
"Hours worked is often viewed as a canary in the coal mine for any slowing in broader labor market conditions, as firms will typically trim staff hours before headcount," Commonwealth Bank senior economist Trent Saunders said. "So the increase in hours worked in April may suggest that conditions did not weaken as much as the seasonally adjusted employment data suggest."
Despite the softer headline data, analysts still view Australia's labor market as resilient, and the Reserve Bank of Australia (RBA) may well conclude that the job market remains "tight" ahead of its June meeting.
"Overall, today's print supports our case that 4.35% will mark the peak for the cash rate over this cycle, with the activity data likely to soften enough to keep the RBA on hold at the August meeting following a pause in June," Adam Boyton, ANZ's head of Australian economics, said in a note to clients.
"Our call for the RBA to pause in its June policy meeting is now high-conviction, and the chance that the RBA waits even longer is non-zero. Ultimately, though, the most immediate and pressing concern for the RBA is inflation," Westpac economist Ryan Wells said.
"We continue to expect that the RBA will resume raising the cash rate when the size and pace of pass-through of the energy price shock is revealed."
