A steady labour market support's the Reserve Bank's view of a gradual improvement over the year, though many will fret at the short-term swings between full and part-time work - something the central bank admits it's yet to fully explain.

However, the bank's head of economic analysis, Alexandra Health said on Wednesday that predicting the willingness of Australians to go back to work is proving the most challenging variable for gauging whether official interest rates are right.

The participation rate, which measures the proportion of the working age population either in a job or looking for one, declined slightly in January to 64.6 per cent from 64.7 per cent, helping push the unemployment rate lower.

The latest jobs data follow a significant uptick in business and consumer sentiment, as well as improvements in forward looking indicators of the jobs market, such as NAB Bank's latest company survey.

NSW continues to have nation's strongest labour market, with a jobless rate of 5 per cent, followed by 5.6 per cent in Tasmania, 5.7 per cent in Victoria, 6.3 per cent in Queensland, 6.4 per cent in South Australia and 6.5 per cent in Western Australia.

Paul Dales, an economist at Capital Economics, said the lack of full-time jobs has returned to the fore.

"The number of people working full-time is no higher now than it was in August 2015," he said.

"This is weighing on incomes as lots of people are working fewer hours and the excess supply of labour is keeping wage growth low."


CommSec chief economist Craig James was more upbeat about the figures, saying hours worked have risen.

" As is always the case, there has been some volatility with full-time jobs down sharply in the month and part-time jobs sharply higher.

"But full-time job creation in the December quarter was the strongest in six years. So it was not unexpected that there would be some pull-back in full-time positions."

"There is nothing in the latest data to advance the case for rate hikes or rate cuts."

Brendan O'Connor, opposition employment minister, portrayed the figures as bleak, saying the government must "own" the result, particularly the apparent increase in casualisation of the workforce.

"Too often people are being deemed to be casual when they are not. This government believes in an easy-to-hire, easy-to-fire low wages society. That is almost their reason to exist."