Unemployment eases but trend rate hits four-year high

Australia's unemployment rate slipped to 4.4 per cent in May, down from 4.5 per cent in April, in seasonally adjusted terms.

Data show 40,300 extra people gained employment in May, and the number of unemployed people declined by 18,300.

But in trend terms, which smooths out seasonal volatility, the unemployment rate lifted slightly to 4.4 per cent, up from 4.3 per cent, its highest level in trend terms since the lockdown period ended in 2022.

Over the last four years, the unemployment rate has been very slowly trending higher as the Reserve Bank has tried to support the economy through multiple supply-side shocks while bringing inflation down.

Today's data confirms that long-term upward trend in the unemployment rate continues.

In the RBA's recent forecasts, it had the unemployment rate sitting at 4.3 per cent by the end of this year, 4.4 per cent by June 2027, and 4.6 per cent by the end of 2027.

Economy slowing, unemployment gradually rising

BetaShares chief economist David Bassanese said the gradual employment slowdown was underway.

"The overall pace of employment growth appears to be slowing, and the unemployment rate is edging higher," he said.

"That said, the slowdown to date remains quite gradual and orderly, consistent with a return to a period of below-trend economic growth rather than an economy slumping into recession.

"As such, the Reserve Bank is unlikely to be unduly alarmed by the labour market slowdown to date and instead quietly welcoming the softening in conditions.

"After all, the RBA is forecasting a slowdown in economic growth through 2026 to 1.3 per cent, from 2.6 per cent over 2025," he said.

Indeed APAC economist Callam Pickering said employment had increased by 147,500 people over the past year, which was "a pretty sluggish result", and it was up just 76,700 people this year.

"If growth of that nature continues, then higher unemployment is inevitable," he said.

"That level of employment growth simply isn't sufficient to match the increase in Australia's working age population."

Mr Pickering said there were "certainly some cracks" appearing in the jobs market, but he was not convinced that they were enough to stop the RBA from hiking rates again.

"Inflation is simply too high and too broad-based to be ignored," he said.