Unemployment hits 4.6 per cent but hours worked declines due to lockdowns

Following the release of the labour statistics, Federal Treasurer Josh Frydenberg warned the lowest rate in more than a decade was overshadowed by the impact lockdowns are having on the economy.

"Normally when the unemployment rate is a 12-year low, it'd be a cause for celebration, but not today," Mr Frydenberg said on Thursday. "Today's numbers show the impact of the lockdowns are having."

The monthly figures released by the Australian Bureau of Statistics showed a 0.3 percentage point drop in the unemployment rate to 4.6 per cent for July, its lowest level since 2008.

Despite a fall beating market expectations, the onus of concern was on the number of hours worked, which fell 0.2 per cent, or the equivalent of 3.1 million less hours than the prior month.

The impact on New South Wales was the most pronounced, but the recovery from Victoria's fourth lockdown was able to offset some of the impact at a national level.

"There were big falls in New South Wales in both employment (-36,000) and unemployment (-27,000), with the labour force reducing by around 64,000 people," ABS statistician Bjorn Jarvis said.

"In addition, hours worked in New South Wales fell by 7 per cent."

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Mr Frydenberg said he expects labour figures will fall further while restrictions batter productivity.

"I would expect we will see a continued negative impact in the labour force data next month, in the month of August, and indeed maybe after that," he said.

At national level, there was 39,900 less unemployed people, however the figure is being influenced by the number of people exiting job markets while lockdowns endure, and is putting people outside the scope of the employment statistics.

Labor Treasury spokesman Jim Chalmers said Australia's unemployment rate had only fallen because 37,000 people had given up looking for work.

"We shouldn't be in this position 18 months into the pandemic," Dr Chalmers said.

"Most worryingly, today's figures are the first glimpse of our workforce as a result of lockdowns, with many concerned job losses are expected to increase in the months ahead."

ANZ senior economist Catherine Birch said the impacts from the third wave would become more pronounced in coming months.

"While employment losses are likely to be significantly larger over coming months, fiscal support and labour hoarding should mitigate the impact," Ms Birch said.

"But this will mask a further steep rise in workers on reduced or zero hours."

He noted every week Melbourne and Sydney remain in pause by the virus, it is costing the economy $2 billion per week.

"It's not an insignificant impact these lockdowns are having, we'll see that play out in the September quarter," Mr Frydenberg said.

Treasury estimates gross domestic product in the September quarter will fall to negative 2 per cent, which is a bigger contraction to what the Reserve Bank anticipates.

Mr Frydenberg said it was too early to tell if the final quarter of 2021 would be impacted by virus lockdowns, but flagged vaccinations were the only way to throw off the economic burden.

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