The jobs market kept pressing forward in May and now it’s up to Australia to take the front foot against Paraguay on the World Cup stage tomorrow! After a heavy knock in April with employment falling 40.7k, May delivered a strong rebound with a 40.3k gain, putting the labour market back on the attack.
The labour market looked to be softening in April. Employment was revised sharply lower from the initial 18.6k decline reported in April and it was the largest fall in 11 months. But May reversed that almost entirely with employment rising 40.3k, the strongest lift in five months.
There is clear volatility month to month. Looking through the noise, the three-month gain of 19.1k and three-month average of 6.4k are modest relative to most of the strength seen over the past year.
The data reinforces the Reserve Bank Governor’s recent description of the labour market as “a little tight”. The 0.1 percentage point fall in the unemployment rate to 4.4% in May only adds to that view.
There are some possible emerging signs of fragility in the mix of jobs. Part-time employment rose 35.2k in May and annual growth lifted to 2.1%. But over the past three months, part-time jobs have still declined. Full-time work remains soft. It rose just 5.2k in May and annual growth slowed to a six-month low of 0.5%.
This aligns with feedback from our recent roundtable with recruitment businesses. Employers are becoming more cautious and are increasingly turning to part time and temporary hiring rather than committing to full-time roles.
Hours worked fell by 1.1% in May, adding to the picture of a market that is easing at the margins. Employers typically adjust hours first and slow full-time hiring before moving to layoffs. The continued decline in job advertisements supports this trend. Job ads have dropped 5.8% over the year to May, the weakest annual growth rate since early 2025.
Last week, we considered removing an August rate hike from our forecasts but chose not to. The Reserve Bank decision in August will be finely balanced, but the risks still lean toward one more increase.
The data over the past two days reinforces this view. The labour-market resilience is lingering and inflation has shown more signs of second-round effects from higher oil and material costs. Moreover, household spending growth remains robust. New data today showed household spending jumped 1.3% in May, lifting the annual rate from 5.1% to 5.5%. Consumers may be downbeat, but the cash registers are still ka-chinging.
Turning to the jobs detail across states, Victoria and Queensland drove the job gains in May. Employment rose 22.9k and 18.3k in these states, respectively. Employment in New South Wales stayed weak. Employment rose just 0.7k in May in New South Wales and has fallen by a net 46.9k over the past two months, the weakest outcome in almost a year.
