Unemployment rate slides to 4pc in May as jobs market holds tight

Australia’s unemployment rate has slipped lower to just 4 per cent, with a spike in people starting new jobs last month.

The figure was in line with forecasts, and the Australian Bureau of Statistics reported some of May’s rise in employment reflected people starting new jobs or returning to their jobs.

It’s a decrease from 4.1 per cent in April and keeps the unemployment rate at near half-century low levels, which is supporting the broader economy despite cost-of-living pressures and higher interest rates.

The Reserve Bank of Australia on Tuesday will announce its latest decision on interest rates but most economists expect they will be kept on hold at 4.35 per cent.

The ABS also reported there are now nearly 600,000 unemployed people, but that’s still nearly 110,000 fewer than in March 2020, just before the pandemic.

“The labour market in Australia is in good shape and has proven more resilient than we were expecting,” AMP deputy chief economist Diana Mousina said.

At a State level, the unemployment rate is lowest in WA at 3.6 per cent, and highest in Victoria at 4.4 per cent. NSW posted 3.8 per cent and it is now 4 per cent in Queensland and SA.

The ABS also reported the national population spiked to 26.97 million people to the end of 2023, with WA and Victoria the fastest growing States over the year, jumping 3.3 per cent and 2.8 per cent, respectively.

ING head of Asia-Pacific research Robert Carnell said the labour market was ticking along at a modest pace after slowing down towards the end of last year.

He added the overall situation was more positive than negative, with unemployment rising at a much slower pace than late last year.

Betashares chief economist David Bassanese explained while the unemployment rate had averaged 3.9 per cent so far this year, that was higher than 3.8 per cent in the second half of last year and 3.6 per cent at the start of 2023.

He said wage growth was slowing in line with jobs market slowing, which suggested services inflation would also ease further — which central banks are hoping for — and that rates could be cut.

“The glacial easing in labour market pressures and likely further declines in inflation should allow the RBA to cut rates at least once this year, though not before November or December,” Mr Bassanese said, adding there was still a risk of stimulus from Federal and State Budget cost of living measures.

Ms Mousina said indicators for the overall unemployment rate, such as underemployment, youth unemployment, firms reporting labour issues and job ads, were loosening, which suggested “a further unwinding of tight labour market conditions from here”.

She added there was minimal chance of a rate hike but it may be discussed at the RBA’s meeting because it had been last month.

KPMG chief economist Brendan Rynne said: “The Bank is anticipated to continue sitting on its hands for at least another quarter until the trajectory of headline and core inflation becomes clearer.”

KPMG noted in a separate report that the national labour market is inefficient — what employers want is not being met by the skills of jobseekers. It has found bosses need to publish a greater number of vacancies to fill the roles they need because of the skills mismatch.