"It's not a disastrous number, annual growth in employment is still running at 2.2 percent which historically is quite strong," said Rob Henderson, chief economist markets at nabCapital.
Indeed, job gains in April were revised up by 12,100 to an even stronger 37,500 increase, taking some of the sting out of the May fall.
"But there is evidence that the slowdown that we've seen, particularly in the service sectors, is now showing up in reduced hiring," added Henderson. "It's a little bit more accumulating evidence that the economy is responding to rate hikes."
The Reserve Bank of Australia (RBA) has raised its cash rate twice this year, taking it to a 12-year high of 7.25 percent, as it sought to cool the economy and restrain inflation.
Earlier this month the central bank warned it might yet have to tighten again should domestic demand not slow as desired. Thus there was a silver lining in the jobs report in that an easing in the drum-tight labor market should lessen the need for a hike.
"The Reserve Bank will be very happy with these numbers," said Brian Redican, a senior economist at Macquarie. "We've seen retail sales decline like they wanted. Confidence has been curtailed. And now the final peg off the wall is this slackening in the labor market."
"It should give the RBA confidence that we've seen the peak in wages and that inflation will begin to recede," said Redican.
Hike Still Seen
Investors seemed to agree to some extent as bill futures surged on the data. Yet, the market is still pricing in around one more hike of 25 basis points in coming months, in part due to global alarm at rising inflationary pressures.