Key points:
  • Australia's unemployment rate was 4% (seasonally adjusted) in May, down from 4.1% in April.
  • Around 39,700 are added to employment figures as more people begin and return to work.
  • Both participation and employment-to-population rates remain steady and higher than pre-pandemic levels at 66.8% and 64.1%, respectively.
  • Economists believe the latest jobs figures reinforce the view of another cash rate hold when the RBA Board convenenes on 17-18 June.

May labour force data showed an additional 39,700 individuals landed jobs, while those looking for work fell to 9,000, down from over 30,000 jobless in April.  

“Unemployment was around 24,000 people more than in March, an average increase of around 12,000 people each month,” ABS head of labour statistics Bjorn Jarvis said. 

“There are now almost 600,000 unemployed people, however, that is still nearly 110,000 fewer people than in March 2020, just before the pandemic.” 

The latest employment figures were broadly in line with market consensus which anticipated the jobless rate to fall back after accelerating to 4.1% in April due to the unusually elevated number of people waiting to start work.

“Some of the fall in unemployment and rise in employment in May reflects these people starting or returning to their jobs,” Mr Jarvis said. 

Major bank economists who anticipated the payback in the May data noted the growing impact of changing seasonal patterns (i.e. the Easter holiday in the April print). 

“The prior month had an unusual amount of people who were classified as unemployed but were waiting to start a new job, which we assessed then was worth around a tenth on the unemployment rate,” NAB head of market economics Tapas Strickland noted.

As such, economists at NAB believe the fallback does not point to a labour market getting tighter, but rather “supports the assessment that last month’s read overstated the pace of underlying cooling”.

Looking through seasonally adjusted numbers

The increase in employment and fall in unemployment numbers has kept the participation rate steady at 66.8%. 

Similarly, the seasonally adjusted employment-to-population ratio was stable at 64.1%, a whisper above the previous month’s 64%. 

"The employment-to-population ratio and participation rate both continue to be much higher than their pre-pandemic levels,” Mr Jarvis said.

“Together with elevated levels of job vacancies, this suggests the labour market remains relatively tight, though less than in late 2022 and early 2023." 

Both underemployment (6.7%) and underutilisation (10.7%) rates in May also stayed at the same level as the month prior. 

Quite notable, however, is the continued decline in hours worked despite the growth in full-time employment.

Full-time jobs increased by 41,700, while available part-time work declined by 2,100 in the month. 

Meanwhile, seasonally adjusted hours worked slid by 0.5% in May, following a 0.2% fall in April. 

Trend data suggests a relatively tight labour market

Despite the slight decline in seasonally adjusted figures, ABS data showed trend unemployment rate rose 4%, up from the revised 3.9% in April. 

Compared to the more volatile seasonally adjusted figures, the trend data looks beyond seasonal shifts to provide a measure of the underlying behaviour of the labour market. 

May’s trend unemployment rate was the highest since the ABS re-introduced the trend series data in April 2022. 

“The upshot is that not much has changed from April in terms of the labour market, with the latest few months of data affected by deviations from usual seasonal patterns of hiring,” CBA economist Stephen Wu said. 

The employment-to-population ratio remaining at 64.1% – close to historically high levels seen throughout 2023 – indicates that the labour market remains tight. 

Further, the trend underemployment rate was in line with seasonal figures at 6.7%, while the underutilisation rate at 10.6% was a touch below the seasonally adjusted series. 

Citing the increasing unemployment rate and the slowing growth of total hours worked, ANZ senior economist Blair Chapman said, “The labour market continues to ease, although the pace of easing is slow.”  

Recent data therefore suggests the labour market, despite noted easing, remains relatively tight. 

What will the RBA think about the latest jobs figures?

Economists expect the RBA is likely “quietly pleased” with today’s jobless data, as it aligns with its May forecast from its Statement of Monetary Policy.

The central bank expects the unemployment rate to sit at an average of 4% in Q2, before further rising to 4.2% in Q4 this year until it hits 4.3% by the end of 2025.

RBA Governor Michele Bullock has been adamant in saying the central bank intends to maintain the gains in the labour market while it works to get inflation down. 

“We think at the moment we are probably okay … but things are uncertain and if we have to move we will,” Gov Bullock earlier said. 

But today’s data is believed to grant the RBA more time to address inflationary pressures. 

"The RBA is expected to maintain its current stance of cautious non-action at next week’s meeting," RSM Australia economist Devika Shivadekar said. 

The rate-setting committee is convening for the fourth time this year on 17-18 June. 

Photo by Israel Andrade on Unsplash