More women and older people entering the workforce has driven Australia’s unemployment rate higher.

Despite the net creation of 34,700 new jobs, unemployment rose to 5.3 per cent in August, up from 5.2 per cent in July.

Economists attributed the small rise in unemployment to the growing number of Australians working or seeking jobs.

Known as the labour participation rate, this figure increased 0.1 per cent to a record high 66.2 per cent.

“The data today really just confirms more of the same from the labour market,” BIS Oxford Economics chief economist Sarah Hunter told The New Daily.

“The extra jobs were matched against extra people entering the labour force and so, broadly speaking, the unemployment rate didn’t move.”

Dr Hunter said women’s labour participation rate had been trending up for decades but had “really lifted quite significantly over the last few years”.

“It’s a good thing, as it shows women are able to go back to work,” Dr Hunter said.

“And with the older workers, what we’re perhaps seeing is that now we’re all living a bit longer, people don’t feel like they need or want to retire at the same age as the generations before.”

Dr Hunter conceded financial hardship could also have had a small part to play in the growing participation rate – with falling household incomes encouraging more women to earn a second wage, and declining savings forcing older Australians to delay retirement.

“All we know is it’s definitely happening. And the key question is, how much further does the [rising participation rate] have to run?” Dr Hunter said.

“That really is so crucial to what happens to wages growth, because at the moment, if you’re a firm looking to hire and you can hire someone who isn’t currently employed, that means you don’t have to offer a wage premium to attract someone from another firm to move.

“So that’s a significant drag on wages growth.”

Underemployment – defined by the Australian Bureau of Statistics as anyone aged 15 or older who wants to work more hours and is working less than 35 hours per week – also increased, to 8.6 per cent, or 1.167 million people.

“This means the unemployment rate is too high [compared with] what it could potentially be which, according to the Reserve Bank, is 4.5 per cent in Australia,” AMP Capital senior economist Diana Mousina told The New Daily.

“So we’re working below capacity. And that makes sense given that GDP data showed we only grew by 1.4 per cent over the past year.”

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Ms Mousina said the slight uptick in employment underscored the need for further interest rate cuts.

And IFM Investors chief economist Alex Joiner agreed.

That August’s unemployment rate was higher than the 5 per cent initially forecast by the Reserve Bank was reason enough for the central bank to cut rates in October, Dr Joiner said.

Doing so would go some way towards bringing down the unemployment rate, which in turn would help lift inflation and kickstart wages growth.

“But the Reserve Bank can’t do it by themselves, and they know that,” Dr Joiner said, referring to RBA governor Philip Lowe’s persistent appeals for more government spending.

“We all know it. It’s whether anything will change and it doesn’t seem like that’s imminent as yet.”