The number of people without a job in NSW has jumped by 34,000 in three months and the unemployment rate has reached a five-year high as rising interest rates, elevated petrol prices and falling house prices, sap demand for employment across the state.
The NSW unemployment rate hit 4.7 per cent last month, the highest since November 2021 when the state economy was recovering from the disruptions of pandemic lockdowns. The number looking for work in NSW reached 223,000, also the highest since the COVID-19 crisis, figures from the Australian Bureau of Statistics show.
If not for a fall in the labour force participation rate – the share of people in work or looking for work – last month’s jobless rate in NSW would have been higher.
The Reserve Bank raised interest rates in February, March and May and the latest figures show demand for employment in NSW has deteriorated sharply following those hikes: since June the state’s unemployment rate has climbed from 4 per cent to 4.7 per cent.
The total number of employed people in NSW last month was the lowest since January, meaning most of the jobs added this year have since been lost.
KPMG urban economist Terry Rawnsley said the rise in unemployment reflected the economic headwinds buffeting NSW.
“We’ve had interest rate increases, we’ve got the fuel price shock working through the system, which is feeding into cost of living pressures, so all these factors have taken a bit of steam out of the NSW labour market,” he said.
“Unfortunately, that does mean many people are not finding the hours they’re looking for, or not finding the jobs they’re looking for.”
Full-time male employment in NSW has been hit especially hard by the weakening jobs market – since June the number of men in the state with a full-time job has fallen by more than 31,000.
The figures pre-date the Reserve Bank’s most recent interest rate increase at the end of last month when it lifted the official cash rate to a 15-year high of 4.6 per cent. That move threatens to further sap demand for workers in NSW.
Analysis by state Treasury, published in the June budget, showed the NSW economy is more sensitive to interest rate increases than other states.
“The sensitivity arises from the higher level of house prices and the resulting larger mortgage payment burden relative to income for NSW households, which amplifies the effects of higher interest rates on disposable incomes, consumption, and housing market conditions,” the budget papers said.
In the March quarter of 2026, the average new housing loan for owner occupiers in NSW was $860,000, 28 per cent more than in Victoria.
The September jobs figures show the state’s unemployment rate is now higher than forecast in the June budget which predicted the jobless rate would be 4.5 per cent in 2026-27.
The NSW unemployment rate was consistently better than the national figure during the first half of this year, but the persistent economic headwinds have changed that. The lowest unemployment rate among the states in September was in South Australia and Western Australia, at 4.2 per cent, followed by Queensland with 4.5 per cent.
The weaker employment conditions in NSW helped lift the national unemployment rate to a near five-year high of 4.7 per cent in September. Employment in Australia fell by 39,000 in the month.
Oxford Economics Australia economist Oscar Guth said the figures confirmed the overall softening in the nation’s jobs market which had become evident over recent months.
“The rise in the unemployment rate to 4.7 per cent gives the RBA more room to be patient and assess incoming inflation data before raising rates again. This is consistent with our view that a further rate hike will come in the first quarter of next year,” he said.