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Highlights
- Unemployment remains stable at 4.1% in May
- Job market shows resilience amid high interest rates
- Hours worked rebound by 1.3% from April dip
Australia’s unemployment rate remained steady at 4.1% in May 2025, matching expectations and continuing a stable trend observed since August 2024. While job growth had been anticipated—economists projected around 22,500 new positions—the labour market instead contracted slightly with 2,500 jobs lost in the month.
This marks another month of resilience for the Australian employment sector, which has defied typical trends associated with higher interest rates. Since last year, the unemployment rate has fluctuated narrowly between 3.9% and 4.1%, indicating a remarkably steady job market environment.
According to the Australian Bureau of Statistics (ABS), despite the minor fall in total employment, hours worked increased by 1.3%. This bounce-back follows softer activity in March and April, when Easter holidays and extreme weather had disrupted working hours. Additionally, underemployment eased slightly to 5.9%, reflecting a modest improvement in workforce engagement.
Two other key metrics—employment-to-population ratio and the participation rate—both dipped by 0.1 percentage points, settling at 64.2% and 67% respectively. However, on a trend basis, these figures remained unchanged from the start of the year, suggesting underlying labour force stability.
The surprising resilience of employment has caught the attention of the Reserve Bank of Australia (RBA) and government policymakers. Typically, rising interest rates would lead to elevated unemployment as businesses slow hiring. However, the consistent performance of Australia’s job market is being viewed as a policy success, especially when compared to global peers facing higher unemployment amid economic tightening.
For long-term perspective, employment has risen by 2.3% year-on-year—well above the pre-pandemic decade average of 1.7%. This solid growth provides support to broader market confidence, particularly among ASX200 stocks, where the labour market outlook plays a key role in consumer activity and business investment. Investors tracking the performance of top Australian firms like Xero (ASX:XRO), which depend on business sentiment and workforce stability, are likely to watch these data points closely.
As the economy absorbs the current interest rate cycle, continued monitoring of labour statistics will be central in shaping expectations for monetary policy and market sentiment. The persistence of steady job figures, despite external headwinds, positions Australia’s employment sector as a comparative strength within the global economic landscape.
