Odds of a rate cut dip as more Australians find jobs

The chances of a February interest rate cut have taken a tumble after Australia's unemployment rate unexpectedly fell to 3.9 per cent.

The Australian Bureau of Statistics recorded an increase of 35,600 jobs to the economy in November - exceeding the 30,000 gain pencilled in by forecasters.

Analysts had expected the unemployment rate to increase to 4.2 per cent following three consecutive months at 4.1 per cent.

"In November we saw a higher than usual number of people moving into employment who were unemployed and waiting to start work in October," ABS head of labour statistics David Taylor said on Thursday.

"This contributed to the rise in employment and fall in unemployment."

It's the first time the unemployment rate has had a three in front of it since March.

The participation rate dropped 0.1 per cent to 67 per cent, still near record highs.

"Despite the fall, the participation rate was the same as a year ago, and 1.5 percentage points higher than March 2020," Mr Taylor said.

The surprise result will set back expectations that the Reserve Bank of Australia will cut interest rates at its next board meeting in February.

RBA governor Michele Bullock has cited the ongoing strength in the jobs market as a reason why Australia has lagged comparable nations in beginning its monetary easing cycle.

In its November statement on monetary policy, the RBA forecast the unemployment rate to average 4.3 per cent in the fourth quarter.

Strong public sector spending was keeping the jobs market very tight and masking relative weakness in the private sector, said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.

"The labour market continues to defy the broader slowdown in economic activity," he said.

"These data support our expectation that the RBA will keep rates on hold until at least May.

"The RBA board will be reluctant to ease rates while underlying inflation is above target, and the labour market is operating so close to its capacity."

Chances of a rate cut at the first meeting of 2025 had improved before the ABS data release, following a dovish pivot by the central bank at its December rate meeting on Tuesday.