Australia’s unemployment rate sank to 4.1 per cent in December, while 65,200 more jobs were added to the economy, surprising economists and adding to the case for a Reserve Bank rate hike in February.

The typically volatile labour force data, released by the Australian Bureau of Statistics on Thursday, will be taken with a grain of salt by the Reserve Bank.

But it won’t ease RBA governor Michele Bullock’s concerns that the jobs market is still tight.

In December, she said that the board believed the labour market remained a bit tight.

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And while employment growth has been decelerating and job vacancy rates trended lower through last year, Thursday’s data showed the gradual rise in the unemployment rate has stalled since mid-2025.

Consensus forecasts expected the jobless rate to hold steady at 4.3 per cent, while employment growth exceeded predictions for an increase of about 28,000 jobs.

“The growth in employed people led to the participation rate rising slightly to 66.7 per cent. This was despite a 30,000 person drop in unemployment,” ABS head of labour statistics Sean Crick said.

“In December 2025, seasonally adjusted monthly hours worked reached a record high of over two billion hours for the first time.”

Expectations for a rate hike have climbed in recent months since a resurgence in inflation.

Ahead of the release, money markets had fully priced in a 25-basis point increase by August, with traders implying about a quarter chance of a hike on February 3.

While the jobs figures would influence the RBA’s decision at the margins, it all came down to next week’s quarterly inflation data, said AMP chief economist Shane Oliver.

Oliver said there could be some statistical noise in the sample survey due to seasonality, with more 15 to 24 year olds moving into employment in December.

-with AAP