SYDNEY, Feb 16 Reuters Australia employment surprised in January by falling for a second straight month while the jobless rate jumped to its highest since last May, a soft result that could lessen pressure for further aggressive interest rate hikes.

Figures from the Australian Bureau of Statistics on Thursday showed net employment fell 11,500 in January from December, when they dropped a revised 19,900. Market forecasts had been for a rise of 20,000 in January.

The jobless rate climbed to 3.7, when analysts had looked for it to hold at 3.5, and hours worked fell by a sharp 2.1 as more workers than usual took annual leave in January.

Investors reacted by pushing the local dollar 0.4 lower to 0.6879, pricing out the risk of a fourth rate hike while shortterm bonds reversed earlier losses to be up 3 ticks at 96.550.

Threeyear government yields slumped 6 basis points to 3.461 while 10year yields fell 7 bps to 3.789.

Bjorn Jarvis, ABS head of labour statistics, said seasonal factors could explain some of the surprise dip, apart from a largerthanusual increase in unemployed people.

January is the most seasonal time of the year in the Australian labour market, with people leaving jobs but also getting ready to start new jobs or return from leave, said Jarvis.

This January, we saw more people than usual with a job indicating they were starting or returning to work later in the month.

The softness in the labour market, if sustained, could take some pressure off the…