The unemployment rate held steady at 4.1 per cent in April, as was widely expected, but the Australian Bureau of Statistics also recorded an 89,000 rise in employment, smashing financial market expectations.
The labour force print is the last major data release before the Reserve Bank of Australia board announces its next decision on interest rates on Tuesday.
The money market lowered the probability of a 25 basis point cut to about 80 per cent, from 90 per cent before the ABS release, IG market analyst Tony Sycamore said.
"Today's jobs report has provided yet another reminder of the resilience of the Australian labour market, which was a factor in the RBA recently revising lower its unemployment forecasts to 4.2 per cent from 4.5 per cent for the end of 2025," he said.
Strong jobs data and an easing in trade tensions between the US and China this week have led the money market market to reduce its forecast to 73 basis points of cuts by year end, from 100 basis points on Monday.
The central bank's cash interest rate currently stands at 4.10 per cent.
The unemployment rate has been historically low, hovering between the 3.9 to 4.1 per cent range since August 2024.
RBA governor Michele Bullock has expressed concerns that tightness in the labour market could cause price growth to re-accelerate.
But Mr Sycamore still expects the central bank to cut the cash rate on Tuesday, given underlying inflation is back in the target band and lingering tariffs continue to risk impacting global growth.
Employment growth was driven by more women entering the workforce, with the participation rate increasing to 67.1 per cent.
"The participation rate for 35-44 year olds had the largest annual growth, up 1.9 percentage points to 88.3 per cent," ABS head of labour statistics Sean Crick said on Thursday.
Female employment growth of 65,000 was dominated by gains in full-time workers, which rose 42,000.
Oxford Economics Australia head of macroeconomic forecasting, Sean Langcake, said the surge in employment was likely to be short-lived, given it can be partly explained by temporary jobs related to the federal election.
The RBA's preferred measure of inflation - the trimmed mean - fell back into target at 2.9 per cent in April, but the central bank remains concerned tightness in the labour market could cause price rises to accelerate again.
JP Morgan chief economist Ben Jarman also tipped a rate cut but he said it wouldn't be a "slam-dunk case" for the board.
"The economy is picking up gradually while inflation converges to the target mid-point, a soft-landing that justifies a relatively gradual glide path toward neutral," he said.
Wages data released on Wednesday revealed a stronger-than-expected rise in the March quarter but this was driven by changes to industry awards and enterprise agreements.
Slowdown in growth in individual arrangements, which provided a more relevant indicator of how the business cycle was influencing wages costs, indicated the labour market was loosening, CBA senior economist Stephen Wu said.
Thursday's data confirmed the jobless rate remained below the central bank's prediction of 4.2 per cent for the June quarter.
The RBA will release updated economic forecasts in its Statement on Monetary Policy on Tuesday.
Several economists have lifted their forecasts for peak unemployment since US President Donald Trump's tariff announcements sparked expectations of weaker economic growth.
AMP economists Diana Mousina and My Bui expect the unemployment rate to eventually climb to 4.5 per cent.
"(This) suggests that there will be some further downward pressure on wages growth, which we expect to slow towards three per cent over the next 12 months," they said.
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