Australia's jobless rate has risen 0.2 percentage points to 3.7 per cent in July.
Economists largely expected the figure to hold steady over the month.
But the Australian Bureau of Statistics reported employment dropped by around 15,000 people and the number of unemployed increased by 36,000 people.
"The fall in employment follows an average monthly increase of around 42,000 people during the first half of this year. Employment is still around 387,000 people higher than last July," ABS head of labour statistics Bjorn Jarvis said.
The participation rate also decreased 0.1 percentage point to 66.7 per cent.
Mr Jarvis noted July included the school holidays - a time where people take leave and start or exit jobs.
"It's important to consider this when looking at month-to-month changes, compared with the usual seasonal pattern," he said.
Monthly hours worked increased 0.2 per cent in July, while employment decreased 0.1 per cent.
The underemployment rate remained at 6.4 per cent in July, around 2.4 percentage points lower than before the pandemic.
Across the states, unemployment was highest in Tasmania (4.7 per cent), followed by Queensland (4.5 per cent), SA (4.0 per cent), NT (3.9 per cent), ACT (3.8 per cent), Victoria (3.6 per cent), WA (3.4 per cent) and NSW (3.3 per cent).
It will give further weight to the Reserve Bank keeping the cash rate on hold at 4.1 per cent.
"Today's data are likely to be the final nail in the coffin for any lingering expectations of a rate hike in September," said Ben Udy, lead economist for Oxford Economics Australia.
He expected the unemployment rate to rise to around 4.5 per cent by the end of next year.
Treasurer Jim Chalmers told the ALP national conference in Brisbane on Thursday it was a "difficult time for many Australians", as global factors intensified cost-of-living pressures.
But he said inflation was moderating, wages were rising and the government was seeking to take the edge off rent, power, child care and health costs as well as permanently boosting welfare support.
"Our responsible economic management is working for Australia and already seeing progress made, but there's much more to do," he said, moving a more tightly worded party economic platform than that approved in 2021.
The government is expected to hand down the first surplus in 15 years when the final budget outcome is released in late September.
However, the economy is expected to weaken in the coming months, with a new survey showing high levels of concern among managers about the potential for a recession.
The KordaMentha TMA Australia turnaround survey found 70 per cent of respondents anticipated a recession in the next 12 months, including 19 per cent who felt it would occur within six months.
Sectors facing the most stress included construction, consumer discretionary and commercial real estate, on the back of a rising cost base, higher wages and cashflow problems.
A recession is defined by two consecutive quarters where gross domestic product (GDP) falls.
The last official quarterly growth figure was 0.2 per cent, with the June quarter figure due to be reported on September 6.
© AAP 2023