Economists are winding back expectations of another interest rate cut by the Reserve Bank this year after employment soared by 71,500 jobs in February - the largest monthly gain in more than a decade.
The Australian dollar quickly added half a cent and bond yields rose sharply after the jobless data showed the unemployment rate remaining steady at 5.4 per cent, as 53,700 part-time and 17,800 full-time positions were created.
"The chance of a rate cut in April, for domestic reasons, is approaching zero," NAB economist Robert Henderson said.
Markets were pricing in a negligible chance of a 25-basis-point cut to the cash rate at the RBA's April board meeting, Credit Suisse data showed, and only a 20 per cent chance of the cut to 2.75 per cent by the end of 2013.
While economists voiced caution about the volatile nature of month-to-month employment data, they said the numbers suggested the Australian economy could have passed its worst patch.
The data lifted annual jobs growth to about 1.7 per cent, BT Financial Group chief economist Chris Caton said.
UBS interest rate strategist Matthew Johnson said expectations that the RBA had reached the end of its current easing cycle were slightly exaggerated, but in the right direction.
"Any sensible forecaster would be moving their forecast after the run of data we've had over the last week or so," Mr Johnson said. "Prior to that, other factors were encouraging as well, with the big increase in equity values and the decline in the Australian dollar that we've seen in the months up to now also giving us reason to think the RBA wouldn't have to cut the rate quite as far."
The Australian dollar leapt from US103¢ just before the data was released on Thursday morning to about US103.6¢ in a few seconds. It then edged higher to US103.7¢.
"The data shot the lights out," Westpac chief currency strategist Robert Rennie said about the surge in the dollar.
Bond yields soared above the cash rate for the first time since July 2011. Yields on the three-year government debt jumped by almost 15 basis points to 3.15 per cent, the highest since last April. Yields on 10-year bonds lifted to almost 3.7 per cent.
The RBA has held the interest rate at 3 per cent at its past two board meetings, but maintained an easing bias ahead of an expected peak in the mining investment boom later this year and as uncertainty remains around whether other sectors of the economy - such as housing and retail - would be able to drive growth instead.