About 19,000 jobs dropped out of the economy in April, the Australian Bureau of Statistics reported on Thursday.
Economists had expected the unemployment rate to hold at 4.3 per cent and an extra 15,000 jobs added to the economy in the month.
The number of unemployed people rose by 33,000, ABS head of labour statistics Sean Crick said.
"Compared to what we usually see in April, more people remained unemployed this month," he said
Ahead of the release, IG market analyst Tony Sycamore said a resilient result in line with expectations would support the case for more Reserve Bank rate hikes, while an uptick in unemployment would see the rates market dial back expectations.
Money markets had been pricing in about a 15 per cent of a hike at the next RBA meeting in June and were fully pricing in one rate rise by November.
The participation rate fell 0.1 percentage points to 66.7 per cent.
Minutes from the central bank's meeting earlier in May, released on Tuesday, showed most board members still agreed fighting inflation was the priority, even though the risks to economic activity and employment were gathering.
Commonwealth Bank on Wednesday downgraded its economic growth forecast from 1.9 per cent to 1.6 per cent by the end of 2026 and upgraded its peak unemployment forecast from 4.4 per cent to 4.6 per cent.
"That leaves the RBA facing a difficult trade-off," said CBA economists Belinda Allen, Ashwin Clarke and Harry Ottley in a research note.
"Inflation was already running too hot and will go higher from here. At the same time, growth is likely to slow over coming months, which should bring demand more into line with supply and gradually reduce price pressures."
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