Unemployment has reached 4.7% and is at its highest in nearly five years after the economy shed jobs in September as cost of living and higher interest rates bite.

Signs that the labour market is deteriorating more quickly than anticipated lowered the chance of a Reserve Bank interest rate hike on Melbourne Cup day.

Financial markets trimmed the probability of a rate rise on 3 November to below 20% following the latest figures, from about 35% earlier this morning, according to Bloomberg.

The Australian Bureau of Statistics data showed the total number of employed Australians dropped by 39,300 jobs in the month, a surprise for economists who had expected employment to rise by 20,000.

Full-time employment increased by 34,400 in September, but this was more than offset by a sharp drop in part-time employment of 73,700.

The ABS figures would have shown the jobless rate ticking higher last month had it not revised up the August figure from 4.6% to 4.7%.

Underemployment, which includes those with jobs but trying to find more work, lifted to 6.3%, from 6.2% in September.

Financial markets this morning, and before the latest data, put a 40% chance of a hike on Melbourne Cup day, which would be the fifth for the year as the central bank attempts to bring inflation back toward its 2.5% target over the coming 12 months.

The unemployment rate has lifted this year from 4.1% as the economy slows, but there are no immediate signs of a rapid deterioration in the jobs market.

RBA board members at their last meeting discussed how the labour market appeared “broadly stable”.