Australia’s unemployment rate has hit a five-year high of 4.7% in September, official figures show. The last time it was higher was at the end of the COVID lockdowns in October 2021. Throughout 2026, the seasonally adjusted unemployment rate has increased steadily, up from 4.1% in January. The warning signs of a slowing labour market are mounting.A weaker jobs market makes it more likely the Reserve Bank of Australia can wait before moving to raise interest rates again. After the latest jobs figures came out, market expectations of an interest rate rise in early November fell, from 30% tipping a rate rise to just 18%. The RBA is set to meet on Melbourne Cup Day to make its next decision on interest rates.That hard decision will now need to be made with RBA Governor Michele Bullock’s recent warning that unemployment might need to rise further having come to fruition.What the latest data showsUntil last month, the rise in unemployment in 2026 could be explained by more people wanting to work.But the rise in September in the latest Australian Bureau of Statistics data was entirely due to fewer people being employed. Employment fell by 39,300 in September. This was partly offset by a 31,400 fewer people looking for work. On balance, this meant 8,900 more people were unemployed.Together, these are classic symptoms of a slowing labour market: less employment and people being discouraged from looking for work.But there is also something in the latest numbers for anyone wanting a more positive outlook. Despite the fall in total employment, the number of people employed full-time increased by 34,300, up to 10.2 million people.It was a decline in part-time employment, down by 73,600, which explained the overall drop. That decline was in turn behind the increase in the underemployment rate to 6.3%, up by 0.1 percentage point.November’s rates decision isn’t simpleThe RBA faces a conundrum at its November rates meeting. The central bank officially has two jobs, known as its “dual mandate”. On the one hand, it’s trying to keep prices for Australians stable. Its target is to keep consumer price inflation (CPI) – a measure of how fast the prices of household goods and services are rising – between 2–3%. But it has to balance that against trying to “have as many people in jobs as possible”.Today’s labour force survey data is the strongest sign yet that the RBA’s four rate increases in 2026 – up from 3.6% in December last year to 4.6% now – are slowing growth in the labour market. And because the unemployment rate for August was revised up, from 4.6% to 4.7%, it means that the labour market was weaker than the RBA thought when it hiked rates in September.Last month, Michele Bullock said unemployment might need to rise further – to somewhere between 4.5–5% – “to ease pressure on inflation”. Australia’s rate of unemployment is now right within that range.At 4.7%, unemployment in Australia is now at the level that the International Monetary Fund, in its World Economic Outlook released this week, predicted the rate would peak at in 2027.And the impacts of this year’s interest rate rises will still be working their way through the economy in the months to come. So does the RBA decide it has done enough to get inflation back towards the target range? Or will it keep going, with another rate hike? If it does, the risk is that the rate of unemployment is pushed closer to 5%, or even above. On current numbers, 5% unemployment in Australia would mean another 45,700 people unemployed compared to these September figures.The trade-offs for the RBA in trying to manage both inflation and keeping as many Australians in work as possible are becoming harder – and ever more real.Jeff Borland has received funding from the Australian Research Council.