Australia's jobless queue has lengthened again, with the unemployment rate jumping back up to 5.3 per cent in October.

Key points: A spike in unemployment in New South Wales and more modest rise in Victoria drove the result, with the jobless rate either steady or falling in other states

A spike in unemployment in New South Wales and more modest rise in Victoria drove the result, with the jobless rate either steady or falling in other states 10,300 full time jobs and 8,700 part time jobs were shed in October

10,300 full time jobs and 8,700 part time jobs were shed in October The number of people out of work grew by more than 17,000 to 726,100

The jump in unemployment was coupled with the biggest monthly fall in employment for more than three years.

On seasonally adjusted figures, the number of jobs fell 19,000 over the month.

At the same time, the number of unemployed workers grew by more than 17,000 to 726,100.

The weakness was further reflected in the fact fewer people were looking for work, with the participation rate edging down to 66 per cent.

The data continued the trend of a steady increase in the unemployment rate since it dropped to a low of 4.9 per cent in February.

It also pushes the rate further from the Reserve Bank's target of full employment at 4.5 per cent, or lower — the theoretical level at which wages growth should take off in a material way.

The deteriorating situation follows yesterday's disappointing wage price index figures showing workers' pay was barely keeping ahead of inflation in key sectors such as manufacturing, retail and construction.

Wages growth will not be helped by the increasing slackness in the labour market.

On top of the rise in unemployment, underemployment — or the number of workers looking for more hours — rose too, taking the underutilisation rate up to 13.8 per cent, it highest level in more than a year.

Upward pressure on unemployment expected

Capital Economics analyst Ben Udy said the sharp fall in employment will be a concern for the RBA.

"The unemployment rate bounced back from 5.2 per cent to 5.3 per cent and the only reason why it didn't rise even more was that the participation rate fell for the second consecutive month," Mr Udy said.

"Our view is that the participation rate is more likely to rise in coming months adding further upward pressure on the unemployment rate."

The jump in unemployment was entirely driven by the states which had enjoyed the strongest labour market conditions.

New South Wales saw its jobless rate jump 0.3 percentage points to 4.8 per cent in seasonally adjusted terms, while Victoria edged 0.1 percentage point higher to 4.8 per cent as well.

There was better news in Western Australia and South Australia where unemployment fell.

Rate cut odds shorten, dollar drops

The markets immediate reaction was to send the dollar lower, while the odds of another rate cut in February shortened dramatically.

RBC's Su-Lin Ong said it was not the news the Reserve Bank wants to hear, pointing out the "gentle turning point" it was looking for may well be a "turn for the worse."

"Today's report should bring a bit more December cut pricing back into the frame, and we note February market-implied odds have jumped from around 50 per cent yesterday to 67 per cent post the number," Ms Ong said.

"At a stretch we could call employment gains 'stable' around the 12,000 mark, but this is not enough to prevent the unemployment rate from rising.

"This is not the story the RBA wants to hear right now given it's 4.5 per cent [full employment] estimates and prognosis that the economy is reaching a 'gentle turning point'."