Westpac expected Australian employment to rise 20,000 in September, with the unemployment rate holding at 4.6% as the participation rate eases only slightly to 67%, according to a report by the bank on Friday.

Signals on labor demand are mixed, the report said. August's labor force survey points to sluggish employment growth, while broader measures in the June quarter labor account painted a stronger picture, and job ads and business surveys are also pointing in different directions, Westpac added.

Spare capacity continues to build as labor supply outstrips demand, while the participation rate jumped to 67.1% in August, close to its 115-year high set in January 2025, pushing the unemployment rate up to 4.6%, with demand absorbing much of the extra supply but not enough to stop the jobless rate drifting higher, the bank said.

Westpac believes August's figures may carry some residual seasonality from changes to the survey design, while the Australian Bureau of Statistics expects the effect to be modest, but part of August's strength could unwind in September.