The jobless rate edged above near-50-year lows as a surge in jobseekers outpaced a lift in workers securing employment.
Australia's jobless rate increased slightly to 3.5 per cent in August, increasing from 3.4 per cent in July - which was the lowest rate in 48 years.
It was the first monthly rise in the unemployment rate since October.
A total of 33,500 jobs were added for the month, according to the latest Australian Bureau of Statistics labour force data, which followed an unexpected 41,000 fall in July.
"With employment increasing by 33,000 people and unemployment by 14,000, the unemployment rate rose 0.1 percentage points to 3.5 per cent in August, returning to the same rate as June," ABS head of labour statistics Lauren Ford said.
The participation rate also rose to 66.6 per cent from 66.4 per cent in July. Hours worked lifted after a drop in the prior month, while the underemployment rate fell below six per cent.
The stats reveal a labour market that's still highly competitive, despite the uptick in unemployment.
The lift in the jobless rate was driven by the number of people looking for work outstripping the number of people finding jobs, as displayed by the rising participation rate.
KPMG economist Brendan Rynne said there could be a few factors driving the lift in participation in August, including people coming back to work after winter illnesses and returning from holidays.
He said rising living costs could be forcing more people into work, with households likely looking for extra income to cover soaring bills.
Employment Minister Tony Burke said wages should be rising under current economic conditions.
"These results once again demonstrate why we need to update the workplace system and close the loopholes that are undermining wages growth," Mr Burke said.
The Australian Council of Trade Unions echoed his sentiments, with ACTU president Michele O'Neil also pointing out that record numbers of Australians were taking on second jobs to make ends meet.
At the jobs and skills summit earlier this month, the government committed to several reforms to the industrial relations system, including making it easier to engage in multi-employer bargaining.
Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the lift in full-time employment and fall in underemployment showed most Australians had secure income.
"These latest figures clearly contradict the ACTU's claim that people are struggling to find secure jobs," he said.
Employment figures will inform the Reserve Bank of Australia's October rate decision, with AMP economist Diana Mousina noting the central bank was committed to lifting rates to tame inflation.
"In this process, economic growth will have to slow and the unemployment rate will rise," she said.
"The hope is that the high degree of job openings in the economy will provide some buffer, that is, as growth slows, job openings will decline first before a rise in the unemployment rate."
Dr Rynne said it was unclear if the RBA would lift by 25 or 50 basis points, with soaring inflation in the US complicating matters.
He said the US Federal Reserve was likely to stick with aggressive hikes given the inflation results, which may feed into the central bank's next cash rate decision.
"Given this difference in inflation levels, breadth of price adjustments, and balance sheet characteristics between the two countries we believe it is still likely the RBA will adopt a more cautious approach in cash rate rises going forward," Dr Rynne said.
RBA governor Philip Lowe is expected to appear at a House of Representatives economics committee hearing on Friday.