The Reserve Bank of Australia (RBA) draws on a wide range of information to form its assessment of current labour market conditions and its outlook for the labour market. One of the key labour market indicators that the RBA monitors and forecasts is the unemployment rate. 

This paper considers whether information contained in indicators that are typically viewed as signalling a change in conditions before it becomes apparent in the official labour market statistics – referred to here as ‘leading indicators’ – are helpful in forecasting the unemployment rate. 

The paper finds that information contained in measures of unmet demand, such as job advertisements and vacancies, and consumers’ expectations for unemployment, are useful in informing the RBA’s near-term forecasts for the unemployment rate. Models containing these leading indicators can complement the RBA's existing framework for forecasting the unemployment rate, which also considers information such as developments in economic activity, insights from firms in the RBA’s liaison program and the experience of economies overseas.