Australia’s unemployment rate plunges to 4.6 per cent

Australia's unemployment rate has dropped by 0.3 percentage points to 4.6 per cent for the month of July 2021.

New data from the Australian Bureau of Statistics (ABS) showed that between June and July the number of Aussies joining the workforce grew by 2000 jobs – but hours worked fell by 0.2 per cent.

A drop in the number of hours worked comes as multiple states endure prolonged COVID-19 lockdowns, where many people are not working but are still formally employed.

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"The labour market changes in New South Wales between June and July had a large influence on the national figures," said Bjorn Jarvis, head of labour statistics at the ABS.

"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. In addition, hours worked in New South Wales fell by 7.0 per cent. These changes offset increases in employment and hours in Victoria."

As Mr Jarvis explains, a worrying trend is emerging whereby people who are unemployed are dropping out of the search for work altogether.

"Early in the pandemic we saw large falls in participation, which we have again seen in recent lockdowns. Beyond people losing their jobs, we have also seen unemployed people drop out of the labour force," Mr Jarvis said.

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"In Victoria, we saw unemployment fall by 19,000 people in July 2020, during the second wave lockdown, and by 13,000 in the June 2021 lockdown.

"The fall in unemployment in New South Wales in July 2021 was more pronounced than either of these, falling by 27,000 people."

As a result, Mr Jarvis said a falling unemployment rate should not be heralded as a sign of a booming jobs market.

"In each of these instances, the unemployment rate also fell. Falls in unemployment and the unemployment rate may be counter-intuitive, given they have coincided with falls in employment and hours, but reflect the limited ability for people to actively look for work and be available for work during lockdowns. This means that people are falling out of the labour force," Mr Jarvis said.

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"Around 61.5 per cent of the fall in unemployment over June and July is explained by these falls in New South Wales and Victoria.

"The fall in the national unemployment rate in July should not necessarily be viewed as a sign of strengthening in the labour market – it's another indication of the extent of reduced capacity for people to be active in the labour market, in the states with the largest populations."

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