Australia's unemployment rate remained steady at a seasonally adjusted 5.2 per cent in May, but underemployment has risen due to a jobs surge overwhelmingly weighted towards part-time work.
The number of employed people rose by 42,300 to a total 12.87 million during the month, while Thursday's seasonally adjusted data from the Australian Bureau of Statistics also showed a 2,400 decrease in the number of people without work to 704,700.
Economists had expected the jobless rate to remain steady between 5.1 and 5.2 per cent following a surprising uptick in April that ultimately forced the Reserve Bank to cut rates to a new record low last week.
But the monthly underemployment rate edged 0.1 points higher to 8.6 per cent after part-time jobs accounted for 94 per cent of the monthly increase.
CommSec chief economist Craig James said the data covered the federal election period and may account for the skew to part-time workers.
"Clearly there are temporary jobs created each three years for election-related roles," Mr James said.
BIS Oxford Economist Sarah Hunter said the figures confirmed the RBA's view that the economy needed to generate more jobs and that policy loosening was needed to achieve full employment.
"Output per worker is now declining which, together with slack in the labour market, is weighing on wages growth," Dr Hunter said.
It was with the nation's jobs market in mind that the RBA cut the cash rate by 0.25 points to a new record low this month.
RBA Governor Philip Lowe said the the cut should help speed a reduction in the jobless rate a 4.0 to 4.5 per cent level he sees as ideal for kickstarting economic growth.
The market has already priced in a second 0.25 point rate cut in August and Mr James said the ball was now back in the RBA's court.
"We know that interest rates are being driven by the job markets ... so does (it) follow the June rate cut with another move in July or does it wait a little longer - perhaps August after the late July inflation data?" Mr James said.
In seasonally adjusted terms, the largest increase in employment was in NSW, up by 38,500, followed by Victoria's 28,600 and Queensland's 7,800.
The only decreases were in WA, down by 4,000, and Tasmania (400).
The seasonally adjusted unemployment rate increased 0.4 points in Queensland to 6.2 per cent and 0.2 points in WA to 6.3 per cent.
NSW and Victoria have the lowest unemployment rate in the nation at 4.6 per cent.
The seasonally adjusted participation rate for May increased 0.1 points to 66 per cent.
The Australian dollar dipped after the data's 1130 AEST and at 1250 AEST had sagged further to 69.12 US cents.
