Australia’s unemployment rate holds at 4.1 per cent in May but lost jobs offer hope of further rate relief

Australia’s unemployment rate held steady in May despite a surprise dip in the number of jobs and a marginal fall in the participation rate.

The release on Thursday of labour force figures for May by the Australian Bureau of Statistics showed 2500 jobs were lost last month but the unemployment rate is still stuck at a seasonally adjusted 4.1 per cent.

ABS head of labour statistics Sean Crick said employment was still up 2.3 per cent compared to the same time last year, which was stronger than pre-pandemic figures, leading to a 10-year average annual growth rate of 1.7 per cent

“This fall in employment, combined with a drop in unemployment of 3000 people, meant that the unemployment rate remained steady at 4.1 per cent for May,” Mr Crick said.

The unemployment rate has stuck at roughly the same level since November last year, which has been enough to give the Reserve Bank confidence to make two cuts to official interest rates so far this year as it tries to keep inflation in check while also maintaining a healthy jobs market.

Economists had predict about 20,000 new jobs would be added to the economy for May, following a bumper increase of 89,000 in April.

The fall could prompt further moves lower by the RBA when it meets again next month.

The participation rate fell 0.1 percentage points to 67 per cent.

Australia’s unemployment rate has stayed below pre-COVID averages, despite elevated interest rates to bring down inflation, in part because the labour market has been underpinned by strength in government-funded employment, such as in health and aged care.

But growth in market sector jobs — those not supported by government funding — has picked up in recent months, in keeping with a jump in private demand, said JP Morgan economists Ben Jarman, Tom Kennedy and Jack Stinson

“Rotation in employment growth from the public to private sector should improve allocative efficiency and help lift labour productivity growth,” they said ahead of the ABS release.

Listed salaries have increased by 3.6 per cent for the year to May, according to a report by online job site Seek.

The site’s advertised salary index showed growth in pay rates for new positions have remained steady over the past year.

But monthly growth in May was just 0.2 per cent, the smallest one-month increase since October.

Seek senior economist Blair Chapman said the increase in wages advertised was a welcome rise.

“The growth in average advertised salaries is currently outpacing living costs, which is good news for those switching employers as they are likely gaining a real wage increase,” he said.

“This means they can purchase more goods and services or save some of their additional earnings.”

Treasurer Jim Chalmers said reducing levels of unemployment had come about while inflation had also been brought down.

“No major advanced economy has combined unemployment in the low 4s with inflation under 2.5 and three years of continuous growth,” he said in an address at the National Press Club on Wednesday.

“We know this welcome progress in the national aggregate data doesn’t always translate into how people are feeling and faring in local communities. But real wages are growing again.”

The Treasurer has flagged potential tax reform during his second term in the role, which will be examined at a productivity summit to be held in Canberra in August.

“This is all about testing the country’s reform appetite,” Dr Chalmers said.

“I am prepared to do my bit, the government is prepared to do its bit, and what we’ll find out in the course of the next few months is whether everyone is prepared to do their bit as well.”