The jobless rate fell to a four-month low in September, but it has been described as an "oddity" for an economy that is still experiencing weak jobs growth.

Australia's unemployment rate dropped 0.2 per cent to 5.6 per cent in September, the Australian Bureau of Statistics said, which beat market expectations of 5.8 per cent.

Commonwealth Bank senior economist Michael Workman puts the lower unemployment rate down to the fall in the participation rate.

The proportion of the population that have a job, looking for work or ready to start work fell 0.1 per cent to a seven-year low of 64.9 per cent in September.

"Employment growth is just not enough to cover the number of new entrants into the workforce," Mr Workman said.

"Generally the unemployment rate should be rising, it's just this oddity with the participation rate in this survey that is producing an unemployment rate that is not going to six per cent yet, but is most likely to get there in the next quarter or two."

The participation rate has been falling steadily since it reached 66 per cent in November 2010, the highest the ABS's monthly series has recorded.

At the time, the unemployment rate hovered around the five per cent mark.

Mr Workman said he expect the unemployment rate to start stabilising in the first half of 2014 and then to trend downwards.

He says the chance of the Reserve Bank of Australia cutting the cash rate this year is unlikely and the chance of a reduction next year is unclear.

"It really depends on how high the unemployment rate gets over the next few quarters on whether the RBA goes again," he said.

AMP chief economist Shane Oliver said the declining participation rate reflects discouraged job seekers and the demographic impact of an ageing population

"So while its good news that the unemployment rate fell, it doesn't reflect a stronger labour market. In fact the labour market remains quite soft," he said.

"For example, if the participation rate had remained at its 2011 average level the unemployment rate would now be 6.6 per cent."

"The continuing fall in the participation rate suggests that the official unemployment rate may end up peaking around six per cent rather than Federal Treasury's prediction for a rise to 6.25 per cent next year."

Dr Oliver believes the Reserve Bank of Australia won't cut the cash rate from its current record low level of 2.5 per cent this year.

"Jobs growth is probably no weaker than the RBA had been allowing for, the labour market is a lagging indicator of economic conditions and will be the last indicator to turn around," he said.

Other figures from the ABS on Thursday showed that the number of people in Australia with jobs rose by 9,100 in September, following a fall of 10,200 in August.

 

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