Market reaction to the data was largely muted. The Australian dollar initially dipped after the data before recovering to $0.6440, while three-year bond futures held at 96.1.

Markets, which had already slashed bets of rate cuts this year, are still confident rates have peaked. Monetary easing is a long way away though, probably in December.

Figures from the Australian Bureau of Statistics on Thursday showed net employment dropped 6,600 in March from February, when it rose a revised 117,600. Market forecasts had been for a small gain of 10,000 after a blockbuster February.

Full-time employment rose 27,900 in March. The jobless rate climbed slightly to 3.8% from 3.7% the previous month, although that was under a forecast of 3.9%.

Analysts say the March data provides a clearer read on the current labour market conditions as the influence of large seasonal-led statistical changes smoothen out.

"The small drop in employment in March followed a larger-than-usual flow of people into employment in February... However, in March, the flows into employment had returned to a more usual pattern," said Bjorn Jarvis, ABS head of labour statistics.

"The labour market remained relatively tight in March."

The Reserve Bank of Australia has left interest rates unchanged at 4.35% for three straight meetings now as confidence grew that the job market will continue to loosen further.

However, at it most recent meeting in March it said nothing has been ruled in or out on policy. The central bank judged the current labour market condition as tight, but the jobless rate was expected to tick up to 4.2% by June and 4.3% by the end of the year.

Markets are confident that interest rates have peaked but any rate relief looks to be a long way out. Swaps are implying only a 65% probability of a rate cut in December, meaning even one rate cut this year is not guaranteed.