The pound rose as much as 0.3pc to $1.3050, up from around $1.3010 before the data was released. Against the euro, sterling also added 0.3pc to 85.04 pence.
Money market expectations for a 25 basis point rate cut fell slightly to around 62pc, from around two-thirds earlier in the day.
Tuesday's reading showed the number of people in employment rose by 208,000 to 32.90 million, the biggest increase since the three months to January 2019 and much stronger than the median forecast in a Reuters poll for a rise of 110,000.
Excluding bonuses, which smooth out some volatility, the data also showed that pay growth slowed a touch to 3.4pc annually in November, the slowest since the three months to April 2019. Economists had expected regular pay to grow by 3.4pc, although with low inflation earnings are rising in real terms.
Three BoE policymakers have recently said that more stimulus might be needed including a cut to rates to boost a flagging economy, although many analysts say policymakers could hold off if data shows an economic rebound in December following the general election.
Purchasing Managers Index surveys on Friday will provide a clue as to whether that rebound occurred.
"Risk reward is not in favour of chasing GBP lower into a rate cut: With the BoE rate cut priced with a 66pc chance, the risk reward is that they delay their decision until later this year to evaluate how the data and fiscal stimulus plays out. GBP/USD would naturally head higher as a result," Nomura analyst Jordan Rochester said.
Nomura advises a long position on the pound via a two-month option.
Some analysts think the pound looks on shaky ground, however.
"Sterling remains vulnerable in the short term, given positioning," Kit Juckes, an analyst at Societe Generale said, referring to the net long position speculators have built up in the pound this year.
On Monday sterling fell to as low as $1.2962 after UK finance minister Sajid Javid said at the weekend that Britain would not commit to sticking to European Union rules in post-Brexit trade talks.