Newly released Australian Bureau of Statistics (ABS) labour force figures show a steady rate of unemployment in Australia, but a rise in underemployment. 

Unemployment rate remained steady at 5.2 per cent for the month of May, while underemployment rate increased from 8.3 per cent in April to 8.5 per cent in May. 

Even though there were 42,300 jobs created in May, 39,800 of those jobs were part-time, while only 2,400 were full-time employment. 

In addition, the number of hours worked in all jobs decreased by 5.9 million to 1,775 million hours. 

"The vast majority of jobs created were part time, and as a result the underemployment rate ticked up again, to 8.6 per cent," the chief economist at BIS Oxford Economics, Sarah Hunter said. 

Dr Hunter said that underemployment was a key factor in Australia’s slowing wage growth. 

AMP Capital economist Diana Mousina agreed with this, as the underemployment’s effect on wages has been hidden by improvements in the employment rate. 

“We have a bit of a problem in that while the unemployment rate looks OK, it’s definitely hiding some of that underemployment that’s going on,” Ms Mousina said. 

“We’re trying to understand why we have this situation where unemployment rates have been declining in Australia, but wages growth hasn’t improved. One of the reasons for that is we still have this spare capacity, indicated by the underemployment rate,” she added. 

AMP Capital chief economist Shane Oliver also commented on the alarming level of underemployment, as the RBA had to get the economy growing fast enough to reduce Australia’s high level of underemployment, which is currently double that of the United States. 

He also said that without it falling, it would be difficult to bring unemployment down to a level where there would be an upward pressure on wages.