Israel's employment rate declined to 59.9% in May, down from 60.1% in April, according to data released by the Central Bureau of Statistics (CBS).
The drop coincided with a fall in overall labor force participation, which slid to 61.6% of the population aged 15 and over.
The total number of people in the workforce fell to 4,469,000, with unemployment standing at 126,500 individuals, or 2.8% of the labor force.
The contraction in the Israeli labor market mirrors broader global headwinds.
Recent data from the United States showed employers adding only 57,000 jobs in June, significantly below the 115,000 increase anticipated by analysts.
Similarly, Ireland reported its unemployment rate climbing to 5% in June, the highest level in three months.