The jobless rate ticked up 0.1 percentage point for the second month in a row to 4.2 per cent in July, broadly in line with consensus forecasts.
But the 58,000 jobs added to the economy in the month was more than the 20,000 employment increase pencilled in by Commonwealth Bank and Westpac economists ahead of the Australian Bureau of Statistics (ABS) release on Thursday.
That lifted the participation rate to a record high of 67.1 per cent.
"Although the unemployment rate increased by 0.1 percentage point in each of the past two months, the record high participation rate and near record high employment-to-population ratio shows that there continues to be a high number of people in jobs, and looking for and finding jobs," ABS head of labour statistics Kate Lamb said.
The unemployment rate was the highest since November 2021, but was still relatively subdued at one percentage point lower than the pre-COVID-19 level of March 2020.
"The employment and participation measures remain historically high while unemployment and underemployment measures remain historically low, compared with what we saw before the pandemic," she said.
"This suggests the labour market remains quite tight."
The RBA will be closely watching the strength of the labour market - a key economic indicator informing its cash rate settings - as it tries to strike the right balance between taming persistently high inflation and further stalling a slowing economy.
The growth in jobs "flew in the face of" State Street Global Advisors economist Krishna Bhimavarapu's dovish expectations, but the RBA's board would be more focused on the unemployment rate.
"Most importantly, the unemployment rate is now 0.8 percentage points higher than the recent lows," he said.
"With inflation coming down and the unemployment rate rising, the RBA may be less compelled to consider another hike, but nonetheless may hold the cash rate at 4.35 per cent longer than we expect."
AMP chief economist Shane Oliver said the mixed messages were consistent with the RBA keeping rates on hold after "another confusing Australian jobs report".
Another confusing Aust jobs report. July emp +58k, full time emp +60.5k, hrs wkd up & record emp/pop ratio, but unemp rose to 4.2% continuing the rising trend with record participation & hi pop grth. Given the mixed messages this is consistent with RBA staying on hold— Shane Oliver (@ShaneOliverAMP) ABS charts pic.twitter.com/kkRzctulMQAugust 15, 2024
Strength in the jobs market is expected to gradually unwind in an economy already dulled by higher interest rates.
The RBA forecasts the unemployment rate to reach 4.3 per cent by the end of 2024 before plateauing at 4.4 per cent for the next two years.
Persistently high inflation remains a thorn in the central bank's side, with the latest quarterly consumer price index still well above its target range at 3.8 per cent.
Consumers continue to change their spending habits as a result, with thrifty shoppers upping their outlay at discount stores and online marketplaces, according to CommBank's July Household Spending Insights index.
People renting a home continue to be the hardest hit, with spending growth among renters up just 0.3 per cent for the year to July compared with an increase of 3.3 per cent for mortgage holders and 4 per cent for those who own their home outright.
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