The government is expected to address soaring youth unemployment at its Third Plenum next month
AFP

Australia's job market is navigating through an interesting scenario landscape, where a surprising surge in job creation coexists with a rise in unemployment. This is a sign of a resilient labor market, but this unexpected mix is making it unclear what will happen to interest rates next month.

The unemployment rate rose to 4% in December, up from 3.9% in November, according to the Australian Bureau of Statistics (ABS) data released on Thursday, FX Street reported.

"The rise in both the number of people employed and unemployed also saw a further rise in the participation rate, that is the percentage of the population who are employed or unemployed," Bjorn Jarvis, ABS head of labor statistics, said in a statement.

While the rise matched the 4.0% market consensus, the Australian employment change reached a remarkable 56.3K in December from 28.2K in November, way surpassing the consensus forecast of 15.0 K.

The unemployment rate is one of the factors that RBA considers in its decision to reduce rate cuts.

These results won't be enough of a reason for the RBA to cut interest rates, according to Cameron McCormack, a portfolio manager at VanEck, The Guardian reported.

The most recent ABS figures show that part-time jobs are seeing a rapid increase, but unemployment is also rising in the same vein, with participation rate holding steady at 67.1%.

"While unemployment has come in higher for December, it hasn't reached a level where there is an urgency for the RBA to cut rates," he said.

Before the release of the latest job market data, investors expected a 73% chance of an interest rate cut to 4.1% in February. However, the likelihood of a rate cut is low given the strong job market data in November, with unemployment at a low 3.9%. This might adversely affect mortgage holders who were looking forward to the cuts.

The rising inflation couldn't affect households as much due to the strong labor market but there are indications of community hardship, as evidenced by the increasing demand for food charities. Household expenditures have sharply decreased, according to recent data, especially for renters who are experiencing a housing crisis, The Guardian reported.