The rise follows a July lull thought to have been the result of historically high numbers abandoning their search for work and dropping out of official statistics.

Australian Bureau of Statistics figures released yesterday showed the August unemployment rate for the Wollongong statistical division (encompassing Wollongong, Shellharbour and Kiama council areas) was 8.6 per cent, up from a July rate of 5.6 per cent.

Illawarra Research and Information Service (IRIS) executive director Simon Pomfret attributed the rise to a correction in the region's participation rate - the yardstick for the number of people in the workforce or actively looking for work.

The official participation rate rose from 52.4 per cent to 57 per cent.

"In July we could argue that people were discouraged from looking for jobs, but in August there were more people looking for work, which has caused a rise in the unemployment rate," Mr Pomfret said.

He believed the jump indicated renewed confidence in the jobs market, not matched by actual jobs.

He expects the region's jobless rate will remain steady and that dire predictions - up to 11 per cent unemployment - made earlier in the year will not eventuate.

There were 120,900 people employed in the region in August, up from 114,600 in July.

The number of people classed as unemployed also rose, to 11,300 from 6800.

Unemployment peaked in May at 9.6 per cent, however official jobless figures do not show how many people are under-employed.

Mr Pomfret said IRIS' business surveys had revealed a growing tendency for employers to cut back their workers' hours, rather than laying them off entirely.

"There's no real measurement of what under-employment is," he said.

"If you're working for more than one or two hours a week you're actually classed as being employed."

The national unemployment rate remained steady at 5.8 per cent for the third consecutive month in August.