Australia’s unemployment rate unexpectedly dropped to 5.1 per cent in May, returning to its pre-pandemic level as a much larger than expected 115,200 people joined the workforce in the month.
Economists had expected the jobless rate to hold at April’s level of 5.5 per cent with a more modest 30,000 increase in employment.
This was the seventh consecutive drop in the unemployment rate, the Australian Bureau of Statistics said on Thursday.
“The declining unemployment rate continues to align with the strong increases in job vacancies,” ABS head of labour statistics Bjorn Jarvis said.
“The number of unemployed people has fallen by around 303,000 since the peak of one million unemployed people in July 2020.”
Speaking before the jobs figures, Reserve Bank of Australia governor Philip Lowe said while some businesses are finding it hard to hire workers, wage increases have been modest.
In his first public appearance since March, Dr Lowe told an audience in Toowoomba that while the labour market was tightening, wages growth and inflation remains subdued.
“It is noteworthy that even in those pockets where firms are finding it hardest to hire workers, wage increases are mostly modest,” Dr Lowe told the Australian Farm Institute conference on Thursday.
“There are some exceptions to this, but they are fairly isolated.”
The RBA wants to see inflation sustainably within the two to three per cent target before it considers raising the cash rate from its record low 0.1 per cent.
This, it says, will need wage growth to double from its current low rate of 1.5 per cent and the unemployment rate substantially lower than its present rate of 5.5 per cent, events it does not expect until 2024 at the earliest.
Dr Lowe said he expected the consumer price index to spike to about 3.5 per cent in the June quarter due to the unwinding of some pandemic-related price reductions.
“There have also been price increases for some items due to pandemic-related interruptions to supply. But beyond this, inflation pressures remain subdued and are likely to remain so,” Dr Lowe said.