The S&P/ASX 200 Index (ASX: XJO) is up 0.5% at the time of writing, down from early morning gains of more than 0.7%.
The benchmark Aussie index is enjoying a strong run on the back of the latest US inflation figures and Federal Reserve meeting.
ASX investors also initially reacted positively to the latest unemployment data released by the Australian Bureau of Statistics (ABS) at 11.30am AEST.
But the ASX 200 has since slipped more than 0.1% since that announcement.
Here's what we know.
ASX 200 dips on strong labour figures
In a classic case of good news for the economy equating to potentially bad news for stocks, the ASX 200 has retraced since the ABS reported that Australia's seasonally adjusted unemployment rate decreased by 0.1% to 4.0% in May.
Investors may be feeling jittery as the strong labour market could usher in further pay rises, adding to inflationary pressures. This, in turn, could pressure the Reserve Bank of Australia to keep interest rates on hold for longer.
Commenting on the latest figures, Bjorn Jarvis, ABS head of labour statistics, said, "With employment rising by around 40,000 people and the number of unemployed falling by 9,000 people, the unemployment rate fell to 4.0%"
That's an impressive feat, considering the rapid rate of immigration Australia is currently witnessing.
Jarvis noted that May's decline wasn't enough to offset the big unemployment spike in April.
In April, more unemployed people than usual were waiting to start work. Some of the fall in unemployment and rise in employment in May reflect these people starting or returning to their jobs.
While the total number of unemployed people fell by 9,000 in May, this followed a 33,000 increase in April. Unemployment was around 24,000 people more than in March, an average increase of around 12,000 people each month.
But in a sign of just how strong the Aussie economy is, Jarvis pointed out that, "There are now almost 600,000 unemployed people, however, that is still nearly 110,000 fewer people than in March 2020, just before the pandemic."
The rather muted reaction to the strong labour data on the ASX 200 today comes as a number of analysts have been forecasting a dip in unemployment for May.
Among them was the economics team at National Australia Bank Ltd (ASX: NAB) which had forecast the unemployment rate would fall to 4.0%.
According to NAB (quoted by The Australian Financial Review):
The driver is that the prior month had an unusual amount of people who were classified as unemployed, but were waiting to start a new job, which we assessed then was worth around a 10th on the unemployment rate.
