Labour market conditions in Australia remained strong in May, with full-time employment recording a solid increase despite a small fall in total employment. The unemployment and participation rates continue to indicate tight conditions. Despite recent strength in the labour market, Reserve Bank of Australia officials expressed more confidence about the inflation outlook but more concerns about growth prospects when they cut policy rates at their most recent meeting last month. This suggests they will likely consider additional policy easing in upcoming meetings.

The number of people employed in Australia fell by 2,500 persons in May, down from an increase of 87,600 persons in April and well below the consensus forecast for an increase of 20,000. This decline, however, was driven by part-time employment, which fell by 41,200 persons after a previous increase of 29,000 persons. Full-time employment recorded a smaller but still solid increase, rising by 38,700 persons after a previous increase of 58,600 persons. Hours worked recorded a strong increase of 1.3 percent on the month.

Today's data also show the unemployment rate was steady at 4.1 percent in May. The unemployment rate has been little changed from this level for a year. The participation rate eased from 67.1 percent to 67.0 percent, still close to the record high of 67.2 percent recorded in January.

Job growth in Australia is expected at a low 20,000 on the month in May. The jobless rate is expected flat at 4.1 percent from 4.1 percent in April.

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.