This marks a shift following two months of strong employment gains and adds weight to the growing expectations that the Reserve Bank of Australia (RBA) may proceed with another interest rate cut in July.
According to data released by the Australian Bureau of Statistics (ABS), the unemployment rate held steady at 4.1 per cent despite the small decline in employment numbers. This rate remains below the RBA’s projected increase to 4.3 per cent over the year. As of May, the total number of Australians employed stands at approximately 14.62 million.
The May figures follow an impressive jump in April, when around 89,000 Australians entered the workforce. While the recent decrease in employment may appear concerning at first glance, analysts note that a decline in the participation rate helped keep the jobless rate unchanged.
Market analysts and economists suggest this latest data supports the case for a further easing of monetary policy. The RBA has already delivered two 25 basis point cuts to the official cash rate in 2025. The bond markets are currently pricing in an 83 per cent likelihood of a third consecutive cut at the upcoming July meeting.
Economists argue that the slight employment contraction creates a favourable environment for additional rate reductions. Many businesses are reportedly holding off on expansion and hiring due to the ambiguous international outlook.
Rather than a significant rise in job losses, experts anticipate a more gradual shift in the labour market. As hiring activity slows, the number of people entering the job market is expected to exceed the number of new jobs. This mismatch could see the unemployment rate gradually rise to around 4.5 per cent by year’s end.
The number of hours worked across the economy saw a noticeable rise. Hours worked increased by 1.3 per cent in May, likely recovering from disruptions due to the Easter period and adverse weather in previous months. This suggests that while there are fewer people employed, those with jobs may be working more intensively.
There was also a positive development for female workers. The female employment-to-population ratio reached a record high of 60.9 per cent. This figure underscores continuing progress in gender participation within the labour market.
Overall, the modest employment loss in May is unlikely to derail broader monetary policy plans. If anything, the combination of flatlining job growth, steady unemployment, and ongoing global headwinds reinforces the likelihood that the RBA will continue to support the economy with additional rate cuts in the near term.
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