Western Australia's jobless rate rose between November and December from 4.1 per cent to 4.3 per cent.
While the state's jobless rate rose twice as much as the national rate rose, WA still remains better off than some other states.
The nation's unemployment figure went from 5.2 per cent in November to 5.3 per cent in December.
Commonwealth Bank senior economist Michael Workman said despite the reduction, there was still very strong growth in WA in relation to public sector infrastructure spending.
"In WA and Queensland, we are still well off the peak in their employment numbers," he said.
Mr Workman said the oil and gas sector, especially when it came to LNG projects, was still growing.
The national jobless rate rose in December as companies unexpectedly cut staff, narrowing the odds of another interest rate cut by the Reserve Bank.
The number of people employed fell by 5500 after a revised 17,100 gain in November, while the unemployment rate rose to 5.4 per cent from an upwardly revised 5.3 per cent, the Bureau of Statistics said on Thursday.
Economists had tipped a jobless rate of 5.4 per cent, but had expected the economy to add another 4000 jobs for the month.
Full-time employment decreased by 13,800 people to 8.1 million. Part-time employment lifted by 8300 people to 3.4 million, driven by an increase in male part-time workers. There was a total of 656,400 unemployed people in December, an increase of 16,600 people.
The participation rate - the percentage of people either in work or looking for work - remained steady at 65.1 per cent.
Rate cut tipped - but not in February
The dollar fell about a quarter of a cent to $US1.0532 on the news as expectations rose of another rate cut by the Reserve Bank.
The market is pricing in at least one more easing in interest rates following the Reserve Bank's cut to a record-matching low of 3 per cent back in December.
Interbank futures show a one-in-three chance of a move at the RBA's next policy meeting on February 5, though swap rates imply an eventual move to 2.5 per cent this year.
But ANZ senior economist Riki Polygenis said while employment numbers had fallen more than expected, the Reserve Bank would need more evidence of a weakening economy before cutting interest rates again in February.
"In general, we have been expecting the labour market to slow given relative softness in labour-intensive areas of the economy," Ms Polygenis said. "So we do this that this labour market report is consistent with our view that further monetary policy support is needed from the RBA over 2013 to ensure a rebalancing of growth towards non-mining areas of the economy.
"[But] although employment did fall more than expected, it would not have been a large surprise to the RBA, given the sharp falls that we've seen in job advertisements in recent months."
However, UBS economist Matthew Johnson said a February rate cut was a possibility if inflation data, due next week, was benign.
''A core CPI (consumer price index) below 0.5 per cent and I think the RBA will cut in February.''
More jobs in NSW, fewer in Qld
Across the states, the December jobs data was mixed. In Victoria, 14,000 jobs were added as participation rate rose to 65.2 per cent while the unemployment rate inched higher to 5.6 per cent.
In NSW, 8000 jobs were added as the unemployment rate rose by 0.1 percentage point to 5.1 per cent. The participation rate lifted slightly to 63.3 per cent.
In Queensland 22,900 jobs were cut and the unemployment rate increased 0.1 per cent to 6.2 per cent, while the participation rate dropped to 66 per cent.
In Western Australia the jobs and participation rate (69.3 per cent) remains flat, unemployment rate rose slightly to 4.3 per cent.
The unemployment rate rose from 6.7 to 7.3 per cent in Tasmania.
In South Australia the unemployment rate lifted by 0.5 per cent to 5.8 per cent, while in the ACT the participation rate remained level at 72.5 per cent, the unemployment rate up slightly to 4.2 per cent.
In Northern Territory the unemployment rate slid from 3.9 to 3.8 per cent.
Companies cutting staff
NAB economist David de Garis called the jobs data ''a reality check''.
''Most of the leading indicators of labor demand suggest the market is softening and there's been corporate anecdotes backing that up,'' Mr de Garis said.
Weaker commodity prices, a sluggish domestic economy and an elevated currency have prompted companies to put off projects and cut jobs.
More than 1000 jobs were axed in the past week alone. Yesterday, building products maker Boral said it would cut 700 office jobs, while BlueScope Steel outlined plans to sack 170 workers as part of a reconfiguration of its Hastings plant in Victoria.
Vodafone also said yesterday that it was set to close or rebrand Crazy John's chain of mobile phone stores by February 20, putting at risk about 300 jobs across Australia.
On Monday, economic data released by ANZ showed job advertisements dropping by 3.8 per cent in November, a fall for the 10th-straight month.
More seekers than jobs
Commonwealth Bank senior economist Michael Workman said the fall in employment was expected, as the number of people entering the jobs market exceeding the number of positions created.
"Over the past year, jobs were up about 148,000, on average of about 12,000 a month, and that's just not enough to meet the next entrants to the jobs market, which are about 15,000 to 16,000 [people] a month," Mr Workman said.
But the level of unemployment would have been anticipated by the Reserve Bank, and was what sparked the current easing cycle.
"We don't think these are the kinds of numbers that would induce a rate cut from the RBA soon," Mr Workman said.
"We believe that they've been indicating for six to nine months while they cut rates that these were the kinds of outcomes they were expecting on the jobs market. So we've ended up with a 3 per cent cash rate because of the expectation that this was going to happen."
Unemployment rate (per cent, seasonally adjusted)
December: 5.4 per cent
November: 5.3
October: 5.4
September: 5.4
August: 5.1
July: 5.2
New jobs added
December: -5500
November: 13,900
October 10,700
September 14,500
August -8800
- with Aleisha Orr and wires
