Slower hiring and fewer hours of work on offer are allowing the jobs market to weaken gradually at a pace broadly in line with the central bank's expectations.
An unsurprising May labour force report from the Australian Bureau of Statistics on Thursday is unlikely to shift the dial for the Reserve Bank ahead of the June board meeting, with interest rates expected to stay on hold at 4.35 per cent.
After demand for workers surged in the early phase of the COVID-19 pandemic recovery, the labour market has been slowly losing momentum as the RBA's rate hikes work to weaken the economy and knock inflation back to target.
In May, the national statistics bureau recorded a minor fall in the jobless rate to four per cent from 4.1 per cent in April, in line with expectations.
Economists were anticipating some payback as workers resumed after an abnormally large number were waiting to start new roles or return to their jobs in April.
A solid 39,700 jobs were added to the economy across the month - a little higher than the 30,000 lift forecasters pencilled in.
Hours worked fell by 0.5 per cent, with the bureau flagging sickness as a contributor.
IG market analyst Tony Sycamore said the labour force numbers would not impact the RBA board meeting on Monday and Tuesday, with rates likely to stay unchanged.
He said the unemployment rate was in line with the RBA's forecast for the June quarter.
"Today's numbers confirm the labour market remains tight; however, spare capacity is gradually increasing, reflected by softening in the forward indicators and the trend higher in the unemployment rate," he said.
Moody's Analytics economist Harry Murphy Cruise said the labour market was cooling but instead of more lay-offs and redundancies, employers were tempering their hiring plans and shaving hours.
"For the latter, that's seen monthly hours worked fall over the last few months," he said.
"For the former, it's seen the newest entrants to the labour market - predominantly young Aussies and new migrants - face a much tougher go at getting their foot in the door."
Unemployment for both groups had jumped more than the national average, he said.
Treasurer Jim Chalmers said the May data sets showed the labour market remained "an important source of strength in difficult times".
"Despite our economy weakening substantially as a result of higher interest rates, persistent inflation and ongoing global uncertainty, our labour market remains resilient and that's clear from today's result," he said.
Opposition employment spokesperson Michaelia Cash said Australians were working harder to make ends meet and highlighted separate ABS data showing growth in multiple-job holders.
"The cost-of-living pain is not just in the hip pocket when Australians go to buy everyday essentials at the supermarket or have to pay their power bills," Senator Cash said.
"It is now clear that pain extends to having to work harder to make ends meet."
