Australia's unemployment rate rose slightly to 7 percent in October despite 178,800 jobs being added in the first month of a tapering in the JobKeeper and JobSeeker programs.

The headline jobless figure was in line with where most economists expected it to be, up slightly from 6.9 percent last month, but the number of new jobs far exceeded expectations.

The rise was mainly attributable to an increase in the overall participation rate – the proportion of working-age population in work or actively looking for work – which surged ahead to 65.8 per cent up from 64.9 per cent.

Full-time employment increased by 97,000 to 8.6 million people, and part-time employment increased by 81,800 to 4.1 million people according to the Australian Bureau of Statistics. The consensus of economists expected employment to reverse by about 28,000.

Treasurer Josh Frydenberg said 650,000 jobs had now been created over the last five months.

"Today's job numbers confirm that Australia's economic recovery is gaining momentum," Mr. Frydenberg said.

"Significantly, 80 percent of those Australians who either lost their jobs or saw their working hours reduced to zero at the start of the pandemic are now back at work.

"Significantly, there was good job growth here in Victoria as the restrictions started to ease and the effective unemployment rate in Victoria fell from 14% to 10.5%. The road ahead will the long, will be hard, it will be bumpy.

It will not be without its challenges, as with see in South Australia today. But there is a light at the end of the tunnel.

"The measures that the Morrison government have already undertaken - JobKeeper, JobSeeker, the cash flow boost...are all measures that are designed to do one thing - create jobs and got Australians back into work and today's job numbers are encouraging."

ABS head of Labour Statistics Bjorn Jarvis said the strong employment growth pointed to the jobs recovery.

"This strong increase means that employment in October was only 1.7 per cent below March, and reflects a large flow of people from outside the labor force back into employment," Mr Jarvis said.

Citi chief economist Josh Williamson said that the first month of JobKeeper tapering had been largely handled well by employers.

"Seemingly, the lower JobKeeper rate from October onwards hasn’t had any impact on the labor market, even so, JobKeeper payments are still ongoing in the December quarter and March quarter, albeit at a lower rate and to fewer businesses," Mr Williamson.

"We maintain our central view which has been that the unemployment rate will peak at 7.4 per cent, but we no longer see the risk as being higher."

The latest results show that the underemployment rate decreased to 10.4 per cent and the monthly hours worked increased by 21 million hours.

“Encouragingly, the rise in employment was also accompanied by a strong rise in hours worked, particularly in Victoria, where hours increased by 5.6 per cent,” the ABS's Mr. Jarvis said.

Since starting to ease restrictions in October, Victoria’s employment increased by 81,600 people or 2.5 per cent, while employment and hours worked in Victoria remained 4.1 per cent and 9.0 per cent below March compared to 1.7 per cent and 3.8 per cent for the rest of Australia.

The steady result follows a bounce back in payroll fortnightly payrolls across the country with Victoria's payroll numbers kicking back 1 percent as COVID-19 restrictions eased.

CommSec chief economist Craig James said the results meant the outlook for the job market would continue to improve.

"While there is still work ahead to get the jobless rate down, there are grounds for optimism. The recent sharp rebound in job ads and vacancies will lead to future hiring – the lag reflecting the usual hiring process," Mr James said.

"Victoria is now striding out of lockdown and it is hoped that the South Australian lockdown will be short, sharp, and effective."

The result will give economists further confidence that the jobs recovery is underway despite the JobKeeper scheme contracting.

Under the JobKeeper scheme, a new top tier of $1200 will be paid to those doing 20 or more hours of work a week and those doing less will receive $750.

From January 1 to March 28, the tiers will be reduced further to $1000 and $650.

ANZ economists had expected a more pessimistic result given the JobKeeper taper.

"With JobKeeper cut back from late September, we expect employment to have fallen 40,000 in October, with the unemployment rate rising to 7.2 per cent."