U-6 Unemployment Rate Australia 2025: What It Means for Workers

When most Australians hear the word ‘unemployment’, they think of the headline rate splashed across news sites each month. But there’s a deeper, more telling figure economists obsess over: the U-6 unemployment rate. In 2025, as Australia’s economy faces new headwinds and shifting work patterns, understanding the U-6 rate is more crucial than ever for anyone serious about reading the labour market tea leaves.

U-6 vs Headline Unemployment: What’s the Difference?

The headline unemployment rate (officially the ABS “unemployment rate”) only counts people who are actively looking for work but can’t find it. The U-6 unemployment rate, on the other hand, is a broader, more revealing measure. It includes:

• People officially unemployed
• Underemployed workers—those who want more hours but can’t get them
• Marginally attached workers—those who aren’t actively looking but would take a job if offered

Think of U-6 as a spotlight on the ‘hidden slack’ in the labour market. While Australia’s official unemployment rate in early 2025 hovers around 4.2%, the U-6 rate is sitting much higher—closer to 8.7% according to the latest ABS Labour Force data. That gap tells a much deeper story about the real job market.

Why the U-6 Rate Matters in 2025

In the wake of a turbulent few years—pandemic recovery, record migration, and cost-of-living shocks—the composition of Australia’s workforce has shifted dramatically. Several 2025 trends are making the U-6 rate more relevant:

• Underemployment remains sticky: Despite record job ads, many roles are part-time or casual, leaving workers wanting more hours.
• Cost-of-living pressures: With inflation still running above the RBA’s 2–3% target, more Australians are seeking extra work to keep up.
• Migration surge: Australia’s record net migration in 2024–25 has added labour supply, but many new arrivals are in part-time or gig economy roles.
• Tech-driven job shifts: Automation and AI are reshaping industries, with some full-time roles replaced by contract or freelance work.

All of this means the U-6 rate is capturing a growing pool of Australians with insecure or insufficient work, even if the headline unemployment rate looks rosy.

Real-World Impacts: What Does a High U-6 Rate Mean for You?

So why should everyday Australians—and policymakers—care about the U-6? Here’s what it signals in 2025:

• Wage pressure is weaker than it seems: A high U-6 rate means there’s more competition for jobs, so wage growth may stay subdued even as companies report ‘skills shortages’.
• Job security is under strain: Many workers are stringing together multiple part-time roles, or are on rolling contracts with little certainty. This impacts everything from mortgage eligibility to retirement savings.
• Policy responses are evolving: In 2025, the Federal Government’s expanded Jobs and Skills Australia initiatives are focusing on upskilling and supporting transitions from insecure work, explicitly citing U-6 data as a key metric.

For example, a Sydney hospitality worker might technically be ‘employed’—but if they’re only getting 12 hours a week and desperately want more, the U-6 rate is the only official figure that counts their struggle.

How Australia’s U-6 Rate Compares Globally

Australia isn’t alone in facing a stubbornly high U-6 rate. The US, which popularised the U-6 measure, is seeing similar trends: a headline unemployment rate around 3.9% in early 2025, but a U-6 rate closer to 7.5%. Across the OECD, the story is the same—labour market ‘slack’ is sticking around even as economies grow.

For jobseekers and businesses, this means that top-line numbers can be misleading. It’s the U-6 rate that tells you whether the jobs market is truly tight or just treading water.

Looking Ahead: Will the U-6 Rate Fall in 2025?

With the RBA expected to hold rates steady and government skills programs ramping up, there are hopes that underemployment will ease by late 2025. However, most economists predict only a gradual improvement, as structural changes in work (automation, gig economy, migration patterns) keep the U-6 rate elevated compared to the pre-pandemic era.