Australian labour market data for May released today showed a stronger-than-expected increase in employment and a small fall in the unemployment rate, indicating that conditions remain robust despite recent policy tightening by the Reserve Bank of Australia. This ongoing strength in the labour market suggests officials will likely consider further policy tightening at upcoming meetings.

The number of employed in Australia rose by 75,900 persons in May, rebounding sharply from a decline of 4,300 in April and much stronger than the consensus forecast for an increase of 25,000. Full-time employment rose by 61,700 persons after falling by 28,600 previously, while there was an increase of 14,300 in part-time employment after a previous increase of 24,600. Work hours fell 1.8 percent on the month after increasing 2.6 percent previously, with officials noting that this volatility partly reflected the impact of the timing of Easter holidays.

Today's data show the unemployment rate fell from 3.7 percent in April to 3.6 percent in May, just below the consensus forecast of 3.7 percent. The participation rate advanced from 66.7 percent to 66.9 percent.

At a consensus rise of 23,500, employment in May is expected to rebound solidly from April's unexpected decline of 4,300. The unemployment rate, which jumped 2 tenths in April, is expected to hold at 3.7 percent.

The Labour Force Survey is a key economic indicator giving an overall picture of employment and unemployment. Employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The unemployment rate measures the number of unemployed as a percentage of the labour force.

This report is used as an indicator of the health of the domestic economy. Employment trends highlight the strength in job creation and the implications for future sectoral activity. The unemployment rate is used as an indicator of tightness in labor markets and can foreshadow a future increase in wages. Labor force data provide investors with the earliest signs of industry performance. While other data are produced with a month or two delay, these data are available only a week to 10 days after the end of the latest month. Reactions can be dramatic - especially when the result is unanticipated.

The information in the report is invaluable for investors. By looking at employment trends in the various sectors, investors can take more strategic control of their portfolio. If employment in certain industries is growing, there could be investment opportunities in the firms within that industry.

The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.

The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.