Investing.com-- Australia’s job market grew more than expected in May, shrugging off recent signs of cooling as strong labor demand and relatively limited supply of skilled workers also saw the unemployment rate decrease slightly.
The total number of employed people in the country rose by 39,700 in May, data from the Australian Bureau of Statistics showed on Thursday. The increase was more than expectations for a rise of 30,500 people, and also increased the 38,500 people seen in the prior month.
This saw the unemployment rate fall to 4% in May from 4.1% in the prior month, although the decrease was in line with expectations.
Australia’s participation rate- which gauges the percentage of the working-age population that is in the workforce- rose to 66.8% in May, ducking expectations that it would remain at the 66.7% in April.
“Together with elevated levels of job vacancies, this suggests the labour market remains relatively tight, though less than in late 2022 and early 2023," Bjorn Jarvis, ABS head of labour statistics said in a note.
Thursday’s data showed the Australian labor market was running hot despite recent signs of cooling economic growth. But a tight labor market has been one of the key drivers of household spending, which has otherwise deteriorated sharply amid pressure from high inflation and interest rates.
Still, other indicators showed the sector was still cooling slightly. Overall hours worked dropped during the month, a trend that has picked up pace in recent months.
Strength in the labor market gives the Reserve Bank of Australia more headroom to keep interest rates high for longer- a scenario that is likely as Australia grapples with an unexpected increase in inflation this year.
The ASX 200 stock index trimmed some intraday gains after the labor reading, while the Australian dollar traded sideways.