By Poppy Johnston in Canberra

Australia’s jobs data has come in hotter than expected and unwound the weakness in employment growth over the earlier summer months.

The unemployment rate fell 0.4 percentage points to 3.7 per cent in February, down from 4.1 per cent in January and lower than the four per cent result pencilled in by economists.

The 116,000 jobs added to the economy over the month were above the 40,000 rise in employment expected by economists.

Some bounce back was anticipated to reflect changing summer labour market behaviours but the number of extra jobs was higher than expected.

“Don’t get too excited about the strong rise in employment in February as it only unwinds the weakness over the last two months,” Oxford Economics Australia lead economist Ben Udy said.

The average rise in employment over the past three months had been a modest 23,200, Udy said.

Yet, he said the recovery in employment in February was stronger than forecasts and highlighted ongoing tightness in the labour market, which could be cause for concern for the Reserve Bank.

“These data clearly challenge the view that monetary policy is providing enough of a drag on the economy to bring down wage growth and inflation,” he said.

The Reserve Bank of Australia has kept interest rates on hold at 4.35 per cent for three meetings in a row and economists broadly expect the next move to be down.

It’s interest rate hiking cycle is expected to gradually soften the labour market, with the central bank forecasting an unemployment rate of 4.2 per cent by the middle of the year and 4.3 per cent by the end of 2024.

The participation rate rose 0.1 percentage point to 66.7 per cent, the ABS data showed.

“With employment growing by around 116,000 people, and the number of unemployed falling by 52,000 people, the unemployment rate fell to 3.7 per cent,” bureau head of labour statistics Bjorn Jarvis said.

The boost in employment in February followed a weaker couple of months triggered by a larger-than-usual number of people waiting to return to their job or start a new one, the bureau said.

Employment fell by 60,000 in December and January posted a modest 15,000 increase.

The bureau’s jobs update also showed a 2.8 per cent lift in monthly hours worked, with the large increase reflecting the bump in people starting or returning to work.

“This followed a six-month period since July of generally declining hours worked,” Mr Jarvis said.

Treasurer Jim Chalmers welcomed the “remarkable” labour market result.

“Despite everything that’s coming at us from around the world, inflation is moderating and our labour market remains one of our greatest strengths with unemployment remaining below its pre-pandemic average and participation at near record highs,” he said.