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Australian Job Market Remains Strong in May Room for Rising Rates

By James Glynn

SYDNEY–Australia’s job market remained strong in May with a further 60,600 new jobs added over the month, while underemployment levels fell and participation rose to a record level.

The data showed unemployment remained at 3.9% in May, its lowest level since the early 1970s, the Australian Bureau of Statistics said Thursday. The labor market participation rate stood at a record 66.7%.

The solid job market report comes as the Reserve Bank of Australia has started raising official interest rates for the first time in over a decade, while warning that more are coming as the central bank steps up efforts to contain surging inflation.

A 25-basis-point interest-rate rise in May was followed by a 50-basis-point hike in June.

The pace of interest-rate increases is expected to be fast over coming months, potentially slowing economic growth and cooling hiring by the end of the year.

The RBA has signaled its concerns about rapid growth in wages, with the current level of unemployment at the lower end of its estimates of full employment. Job vacancies are at record levels and the country’s Fair Work Commission raised the minimum wage this week by 5.2% per year.

RBA Gov. Philip Lowe said this week that consumer price inflation is expected to be around 7% through this year, a rate well in excess of the central bank’s 2%-3% target. Concerns are growing at the RBA that wage claims will start to reflect the jump in inflation, creating an upward price spiral.

The increase in employment in May was the seventh monthly rise in succession and follows an easing of lockdown restrictions in late 2021. Average employment growth over the past three months is running at 30,000, the ABS said.

In line with rising numbers of Covid-19 cases in May, the number of people working reduced hours due to illness continued to be high. This reflected ongoing disruption associated with the Omicron variant and also an increasing number of cases of influenza, the ABS said.

The number of people working fewer hours than usual due to illness increased in May to around 781,000 people, almost double the usual number for this month, it said.

Write to James Glynn at James.Glynn@wsj.com

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