Unemployment at 4.2% in August

The number of employed Australians dropped by 5,000 in August, while just under 6% of people were underemployed, down from 6.1% in July.

Economists from all of the major banks were expecting between 4.2-4.3% unemployment, up slightly from 4.2% in July.

The labour market looks to be about as tight as forecast by the RBA, with 4.3% unemployment by December forecast in the most recent Statement on Monetary Policy.

The latest results were probably the last major piece of data that could have disrupted the common expectation, shared by economists from all four major banks, that the cash rate will be left on hold when the RBA convenes on 30 September.

Most analysts believe the Board will decide to wait until the November decision, which will benefit from the Q3 inflation figures.

More Aussies go part time?

About 41,000 less people were employed full time in August compared to July in seasonally adjusted terms, about 0.3% of the total number of Australians with jobs.

Offsetting this however was a nearly equivalent increase in people working part time, up 36,000 through the month.

About 31% of the Australian work force is now employed part time, and given the underemployment and underutilisation rates are also declining the rise in part time work appears to be mostly from choice.

Any chance of a September rate cut?

For a while now the consensus among markets and economists has been the RBA are unlikely to cut rates (which would be the fourth cut of the year) in September after dropping to 3.60% in August.

Last month Senior Commbank economist Belinda Allen told the Savings Tip Jar podcast the labour market was the "one thing" that could see the RBA cut in September.

"If [unemployment] gets closer to say, 4.5%, then you start to think about earlier rate cuts and more rate cuts," she told the podcast.

The day before the August unemployment numbers were revealed, just 14% of the market expected the RBA would cut in September according to the ASX RBA tracker.

Does Fed cut have RBA implications?

While the domestic data seems to support an RBA hold, the other big news this week as far as interest rates are concerned was the Federal Reserve (the US Central Bank) cutting rates 0.25%.

The Fed noted the "downside risks to employment" in the US have risen amid "uncertainty about the economic outlook".

Economic slowdowns in the US can have global ramifications, particularly for nations like Australia with close trade and investment ties.

However it's also worth remembering this is the first rate cut of the year in the US (Australia has had three) so another way to interpret this is that inflationary pressure over there was significantly stronger and only now easing and moving the balance of risks.

According to the US Bureau of Labor Statistics, the unemployment rate there was also at 4.3% in August.