By Rachel Clun and Shane Wright
Nearly 40,000 people found work in May, but there are signs the job market is gradually loosening, giving the Reserve Bank little reason to increase interest rates at its board meeting next week.
The unemployment rate eased to 4 per cent in May, from 4.1 per cent the month before, in seasonally adjusted terms, the Australian Bureau of Statistics said on Thursday.
The unemployment rate fell 0.1 of a percentage point to 4 per cent.Credit: Louise Kennerley
Economists had expected about 30,000 jobs to be created in the month, but instead 39,700 people secured jobs.
Australian Bureau of Statistics head of labour statistics Bjorn Jarvis said employment had been buoyed by the fact there had been more unemployed people than usual waiting to start work in April.
“Some of the fall in unemployment and rise in employment in May reflects these people starting or returning to their jobs,” he said.
While seasonally adjusted unemployment declined slightly, it lifted to 4 per cent in trend terms after sitting at 3.9 per cent for six months.
Treasurer Jim Chalmers said the figures showed the labour market was a source of strength in the current difficult economic times.
“We are fighting inflation and repairing the budget without smashing the economy, and we see that in these tens of thousands of new jobs created in May,” he said.
“Despite our economy weakening substantially as a result of higher interest rates, persistent inflation and ongoing global uncertainty, our labour market remains resilient and that’s clear from today’s result.”
But opposition workplace relations spokeswoman Michaelia Cash said households were still being hurt by the cost-of-living crisis.
“It is now clear that pain extends to having to work harder to make ends meet. And the pain extends to small business owners who are fighting a cost-of-doing-business crisis,” she said.
The unemployment rate is already around the Reserve Bank’s forecast for June, and economists said the gradual loosening of the job market – from record lows of 3.5 per cent at the end of 2022 – was positive news for the central bank before its board meeting next week.
Betashares chief economist David Bassanese said the slow upwards march in unemployment was “almost too good to be true”.
“As in the United States, the slow gradual rise in the unemployment rate is consistent with the ‘Goldilocks’ or ‘soft-landing’ scenario markets have long been hoping for,” he said.
“Consistent with such glacial labour market slowing, wage growth is also slowing in both economies, which strongly suggests service inflation will also ease further and the next move in US and Australian official rates will be down.”
Devika Shivadekar, an economist for consulting firm RSM Australia, said the central bank was likely to be quietly pleased with the job figures.
“They are intent on maintaining the recent gains in the labour market, and the stability in employment figures provides crucial support for an otherwise fragile economy,” she said.
“This development grants the central bank more time to address inflationary pressures.”
While the labour market was proving resilient, AMP deputy chief economist Diana Mousina said conditions were not quite as strong as in late 2022, particularly taking into account the broad suite of employment indicators including job ads and youth unemployment.
“The biggest loosening in conditions [is] evident in a rise in the youth unemployment rate as well as the leading indicators like job advertisements and business survey employment intentions,” she said.
“The weakening in the leading indicators is a signal to us that there will be a further unwinding of tight labour market conditions from here.”
KPMG chief economist Brendan Rynne pointed to the rise in the total number of unemployed people in trend terms – to almost 600,000 – and the decline in monthly hours worked for two consecutive months as further signs the labour market was loosening.
“Further, as labour market conditions tend to lag economic growth, the effect of the economic slowdown is yet to be fully translated into labour demand,” he said.
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