The jobless rate jumped to 4.3 per cent in February, despite almost 50,000 more people finding a job, the Australian Bureau of Statistics revealed on Thursday.
The data wrong-footed market economists, who had been tipping the jobless rate to hold steady at 4.1 per cent.
Labour-force figures are notoriously volatile and the latest data was no different, making it hard for economists to find a clear signal through the noise.
"In totality, the data today suggests the labour market remains on the tighter side," Commonwealth Bank's Lucinda Jerogin and Belinda Allen said in a research note.
"Downside risks are building given the war in Iran and rising energy costs. We do see upside risks to the unemployment rate from here."
Oxford Economics Australia revised up its prediction for near-term unemployment, which it now expects to peak just shy of 4.6 per cent in early 2027.
"A sustained period of high energy costs may require a stronger policy response from the RBA, which would resonate through the employment figures," economist Harry McAuley said.
While the unemployment figures pointed to a weaker jobs market than expected, the extra 48,900 jobs added to the economy was stronger than consensus expectations of a 20,000 increase.
It demonstrated a resilient labour market despite rising inflation and interest rates, EY senior economist Paula Gadsby said.
"Robust labour market conditions and low unemployment, especially compared to other advanced nations, give the Reserve Bank room to battle inflation," she said.
"But it will be a fine line to walk in preserving the gains in the labour market from here as growth conditions get tougher, while also ensuring high inflation does not become entrenched."
The number of unemployed people grew by 35,000, contributing to the increase in the unemployment rate, ABS head of labour statistics Sean Crick said.
Fewer people who were unemployed and waiting to start a job in January moved into employment in February, compared to the same month in recent years, he said.
There were also fewer people leaving jobs to retire compared to a year earlier, contributing to a modest increase in the participation rate to 66.9 per cent.
But the make-up of the hiring spree indicated some signs of weakness, with a 79,000 rise in part-time employment offset by a fall in full-time employment of 30,000 people.
Treasurer Jim Chalmers said Australia was one of a few countries that had been able to keep people in jobs in the face of extreme global uncertainty.
"Our resilient labour market is one of the reasons we are well placed and well prepared to manage the impacts of the conflict in the Middle East, but we will not be immune," he said in a statement.
The RBA board raised interest rates for a second straight meeting on Tuesday as high oil prices compounded concerns that Australia's economy was running above capacity.
Thursday's outcome was consistent with central bank forecasts the unemployment rate would peak at 4.3 per cent in 2026, but it left little wriggle room as the impact of the past two rate hikes were yet to flow through, JP Morgan's Tom Kennedy said.
"The RBA has made it clear that the need to anchor inflation expectations is driving the near-term rates cycle and we think surging global energy prices will keep the board skewed hawkish," he said.
"We continue to forecast a rate hike in May."
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