(Corrects month in 2nd paragraph to August (not July))
SYDNEY, Sept 19 (Reuters) - Australian employment rose in August but the jobless rate worsened to a one-year high of 5.3% as more people looked for work, data showed on Thursday, a sign of spare capacity in the labour market that reinforced expectations of more central bank stimulus.
Data showed 34,700 jobs were created in August, more than three times what the market had expected, although full-time employment fell by 15,500 and measures of underemployment and underutilisation edged up.
The Australian dollar AUD= slipped to two-week lows under $0.68 as traders saw an increased chance of a rate cut as soon as the Reserve Bank of Australia's (RBA) next policy meeting on October 1. It would follow back-to-back rate cuts in June and July that took the policy rate to a record low of 1%.
The RBA is closely watching the jobs data as it is counting on labour market strength for a long-awaited pick up in wage growth and inflation. The RBA has said it would like to see the unemployment rate fall to around 4.5% to help generate wage pressures.
That looks like a tall ask as the unemployment rate has been nudging higher since it touched 4.9% in February. One reason why unemployment has been rising is more people are looking for work, with labour force participation rising to a record high of 66.2% in August, up from 65.6% a year earlier.
The figures from the Australian Bureau of Statistics (ABS) showed part-time employment rose by 50,200 in August while full-time employment contracted.
Economists and investors widely expect another cut later this year, and some are predicting the policy rate at 0.5% or lower in 2020 as the RBA steps up efforts to revive growth in Australia's A$1.95 trillion economy which has slowed to decade lows. AU/INT 0#YIB: