Key points
  • Unemployment rate fell to 4.4% in May, with 40,000 jobs added, mostly part-time.
  • Hours worked fell 1.1%, pointing to softer underlying labour demand.
  • Underemployment and underutilisation remain elevated.

The latest labour force data from the Australian Bureau of Statistics (ABS) shows an additional 40,000 people joined the workforce over the month, while the number of unemployed fell by 18,000. 

“Over the past few months, we have recorded higher proportions of unemployed people waiting to start jobs who then remained unemployed in the following month,” ABS head of labour statistics Sean Crick said. 

“The backlog of people waiting to start a job has eased in May.” 

May employment growth was largely driven by 35,000 workers who gained part-time roles, compared with 5,000 full-time jobs.

This is in line with previous jobs data, where demand was also skewed towards part-time employment. 

Employed people seek more hours 

Despite the stronger employment figures, broader measures of spare capacity in the labour market showed less improvement.

The underemployment rate rose 0.1 percentage point to 5.9% on a seasonally adjusted basis. 

Underemployment rate measures the number of people who have jobs but want more hours, typically part-time workers seeking additional work.

Overall, underutilisation rate, which combines unemployment and underemployment, remained unchanged at 10.2%. 

Total hours worked declined 1.1% in May, unwinding the seasonally unusual strong result in April. 

“In April, fewer people took leave during the Easter holiday period and instead worked their usual hours, contributing to non-seasonal strength in hours worked,” Mr Crick said.

According to the ABS, the fall in May brings hours worked back into line with the longer-term trend. 

Economists said the pullback may also signal softening labour demand. 

May jobs data keeps RBA in wait-and-see mode

A falling unemployment rate alongside a strong gain in employment indicates a still relatively tight labour market, an inflation risk. 

Beneath the headline figures, however, the May labour force data sends a mixed signal to the RBA, particularly on the composition of growth. 

Employment gains were driven by part-time jobs, while elevated underemployment and underutilisation pose less immediate wage acceleration risk. 

Soft hours worked also point to cooling labour demand. 

The RBA tends to view hours worked per capita as a leading labour demand indicator, noting businesses tend to adjust hours first before hiring or laying off. 

Jobs market could soften

Westpac economist Ryan Wells noted that while some employers had recently been able to offer more hours, that may not be the case in the coming months.

“As the shock from elevated inflation and higher interest rates continues to weigh on consumer demand, we may start to see employers become less willing to offer additional hours to workers who want them,” Mr Wells said.

Falling headline inflation and softer hours worked may also offer some reassurance that inflation pressures are easing.

However, sticky core price pressures and expected cost pass-through, alongside a still-tight labour market, may see the RBA remain cautious. 

The RBA's monetary policy board elected to keep the cash rate unchanged at 4.35% at its June meeting, though the RBA has signalled it remains prepared to raise rates further, “if required”.