Prime Minister Scott Morrison said the numbers were not surprising given the impact of the coronavirus crisis.
These are devastating numbers: Frydenberg
“We are very aware of the significant blow that Australians are being hit with through the course of this pandemic,” he told reporters in Canberra.
“These statistics today are a reminder to all that our task is simple ... and that is we must get Australians back into work.”
The economy had recorded an unemployment rate of 6.2 per cent in April.
The participation rate of people either in or seeking work fell by a further 0.7 per cent to 62.9 per cent, the lowest level since January 2001.
Monthly hours worked fell 0.7 per cent in May, to be down 10.2 per cent since March.
Treasurer Josh Frydenberg called the figures “devastating”.
“These are not just numbers. These are our friends, family members, workmates and neighbours,” he said.
Youth unemployment has risen from 14.1 per cent to 16.1 per cent.
“Young people, they have been most affected in these numbers,” Mr Morrison said.
“But my hope is that, equally as economy opens up, they will hopefully also be the first to benefit from economy opening up.”
The sharp fall reflects the ongoing impact of strict social distancing measures imposed in late March, which led to business closures.
Most economists had expected the unemployment rate to jump to 7.0 per cent with about 100,000 jobs lost in the month.
Additional reporting by AAP, Evan Young.