Australia’s labour market saw mixed signals in January 2025, with the unemployment rate increasing to 4.1%, up 0.1 percentage point from the previous month, according to data released by the Australian Bureau of Statistics (ABS). While the number of unemployed people grew by 23,000, employment also rose by 44,000, reflecting both an expanding workforce and increased participation in job-seeking.
Despite the slight increase in unemployment, the labour force participation rate reached an all-time high of 67.3%, surpassing previous records. This indicates that more people are either working or actively looking for work.
ABS Head of Labour Statistics, Bjorn Jarvis, explained that this trend reflects continued labour market strength:
“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. 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.”
The current participation rate is 0.8 percentage points higher than a year ago and 1.8 percentage points higher than March 2020, when the COVID-19 pandemic began affecting the Australian job market.
Women Drive Labour Market Growth
One of the most significant aspects of January’s labour force data was the sharp increase in female employment. The 44,000 new jobs were entirely taken up by women, while male employment remained almost unchanged.
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Alongside the rise in female employment, the number of unemployed women increased by 24,000, reflecting a greater number of women entering or re-entering the workforce. This resulted in the female employment-to-population ratio rising to a record high of 60.8%, an increase of 0.7 percentage points from a year ago and 2.9 percentage points higher than pre-pandemic levels.
Jarvis highlighted the significance of this shift:
“With a relatively large increase in female employment in January, their employment-to-population ratio rose 0.3 percentage points, to a record high of 60.8 per cent.”
Meanwhile, the unemployment rate for men remained stable, and their employment levels saw little change, indicating that recent workforce growth has primarily been driven by increased participation among women.
The equal unemployment rate for both men and women, now at 4.1%, suggests a more balanced labour market in terms of gender representation among job seekers.
Seasonal Factors and the Role of Delayed Employment Starts
A key reason for the increase in the unemployment rate was a higher-than-usual number of people waiting to start or return to work in January. This trend has been observed over the past three years, as post-holiday job transitions and seasonal hiring patterns impact the figures.
Jarvis noted that this pattern has become a recurring feature in the Australian labour market:
“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.”
While this factor contributed to the higher unemployment rate, the overall employment trend remained strong, suggesting that many of these individuals are likely to begin working in the coming months.
Hours Worked Decline Slightly
Although employment increased, seasonally adjusted hours worked fell by 0.4% in January. This decline is partly due to seasonal factors, as many employees take time off or work reduced hours in January following the holiday period.
However, this drop in hours worked was the smallest seen in January over the past five years, suggesting that working patterns are returning to pre-pandemic norms.
Jarvis explained:
“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.”
This indicates that while there were some fluctuations in working hours, the overall trend remains positive, with employment growth likely to continue stabilizing over the coming months.
Underemployment and Underutilisation Trends
The underemployment rate, which measures the proportion of people who are employed but seeking additional hours, remained steady at 6.0%. This figure is 0.7 percentage points lower than January 2024, reflecting an improvement in job quality and hours available.
Similarly, the underutilisation rate, which combines unemployment and underemployment, saw a slight increase of 0.1 percentage point to 10.1%. However, this remains 3.8 percentage points lower than March 2020, demonstrating a significant improvement since the early pandemic years.
Importantly, the underutilisation rate remains much lower than historical averages, with similar levels last seen before the Global Financial Crisis in 2008.
Long-Term Trends and Labour Market Stability
Despite the month-to-month fluctuations, trend data suggests labour market stability. The trend unemployment rate remained at 4.0% in January, where it has hovered within a narrow range of 3.9% to 4.1% for the past 12 months.
Employment growth in trend terms was 34,000 people (0.2%), aligning with long-term pre-pandemic averages. Monthly hours worked also grew slightly slower than employment, increasing by 0.1%.
Jarvis noted:
“The employment-to-population ratio rose marginally to a new record high of 64.5 per cent in January, while the participation rate remained at a record high of 67.2 per cent.”
These figures highlight the resilience of the Australian labour market, which continues to see strong workforce participation and stable employment growth despite economic uncertainties.
Implications for the Australian Economy
The increase in both employment and unemployment suggests an expanding labour force, which can be a positive sign for economic growth. When more people enter the workforce, it indicates confidence in job prospects and economic stability.
At the same time, a rise in workforce participation can sometimes lead to a temporary increase in unemployment, as job seekers take time to secure positions. The record-high participation rate of 67.3% underscores this dynamic.
Additionally, female workforce participation continues to be a driving force behind employment growth, reflecting broader social and economic trends. If this trend continues, it could lead to long-term improvements in economic productivity and gender equality in the workforce.
The moderate decline in hours worked suggests that businesses are still adjusting to post-pandemic employment patterns, but the smallest January decline in five years indicates a return to normalcy.
Looking Ahead: What to Expect in 2025
With the labour market remaining resilient, future trends will likely be influenced by:
- Economic conditions, including interest rates and inflation trends
- Government policies affecting employment, immigration, and workforce development
- Seasonal shifts, as more people transition from holiday employment to long-term roles
- Female employment trends, which have been a significant driver of recent growth
The upcoming January 2025 issue of Labour Force, Australia, Detailed, set for release on February 27, 2025, will provide further insights into regional labour market conditions and sector-specific employment trends.
Despite short-term fluctuations, the overall outlook for employment remains strong, with workforce participation reaching record highs and employment levels continuing to grow steadily.
