- The unemployment rate dropped back to 4.1% in December, well below expectations.
- About 65,000 Australians found their way into work throughout the month, also well above what economists were expecting.
- With unemployment now potentially back at inflationary levels, an RBA rate hike in February could be a greater possibility.
There were 65,000 more people in work compared to November while the participation rate increased slightly to 66.7%.
The underemployment rate (people that want to be working more than they are) also dropped by 50 basis points down to 5.7%.
Today's read sees the unemployment rate back where it was in May, when the cash rate was still at 4.10%.
Given the RBA was projecting unemployment to rise to 4.4% by December, a February rate hike may now be more likely.
By most estimates, 4.1% is well below the Non-Accelerating Inflation Rate of Unemployment (NAIRU), which may point to an upside surprise in next weeks CPI inflation figures for December.
ABS head of labour statistics Sean Crick suggested it was predominantly young people driving the surge in employment.
"This month we saw more 15 to 24 year olds moving into employment, contributing to the rise in overall unemployment and the fall in the unemployment rate," Mr Crick said.
"The growth in employed people led to the participation rate rising slightly ... despite a 30,000 person drop in unemployment."
The number of hours worked hit an all time record high in seasonally adjusted terms, cracking 2 billion for the first time ever.
Australia's job market booming?
In seasonally adjusted terms, Australia's jobs market hit an all time high in December, with approximately 14.7 million people in employment.
That means 64% of the population are in work which, although high historically speaking, is below the record 64.4%, reached at various points over the past two years.
It's further confirmation of how resilient the labour market has been to high interest rates.
The unemployment rate, underemployment rate, and employment to population rate have all been consistently stronger in the last three years than the three years leading up to the COVID pandemic, despite a significantly higher cash rate.
Prior to the December numbers, there was some evidence the labour market was starting to soften, with Westpac data suggesting the vacancy-to-unemployment ratio slowly eased as unemployment nudged higher throughout 2025.
Now though, the unexpected surge of Australians finding work in December may suggest there's less 'slack' in the workforce, which means fewer unemployed people per available job.
Rate hike back in play?
At the end of last year many economists were predicting it would take at least another 25 bps cash rate increase for the RBA to bring inflation back under control.
The headline inflation rate jumped to 3.8% in October, far above the RBA's 2% to 3% target range, with underlying inflation also too high at 3.3%.
Expectations of a hike were tempered slightly by the November numbers which, while still above target, suggested price growth moderated slightly through the month.
Now with unemployment potentially low enough to put upward pressure on prices, a hike may once again be looking a very plausible outcome at the February monetary policy meeting.
The inflation numbers for December (which will complete the Q4 picture) are set for release on 28 January and will still likely be the biggest factor in the decision of governor Michele Bullock and the rest of the RBA board.