Unemployment rate surprises with fall to 4.5pc in August

The second straight gravity-defying jobs report did not reflect labour market conditions as Delta lockdowns triggered a plunge in hours worked.

Lockdowns, including in Greater Sydney, hammered the number of working hours in August. Picture: Bianca De Marchi

The unemployment rate fell to 4.5 per cent in August from 4.6 per cent in July, in a second straight gravity-defying result that the ABS said did not reflect labour market conditions as Delta lockdowns triggered a plunge in hours worked.

The drop in the headline jobless measure masked a 146,300 drop in the number of employed Australians, as employment in NSW plunged by close to 175,000 people, offset by gains elsewhere in the country.

The number of full-time jobs fell by 68,000 in the month, while part-time employment dropped 78,200, the seasonally adjusted figures from the Australian Bureau of Statistics showed.

The key to the second counter-intuitive jobs report in as many months was another sharp fall in the participation rate, which dropped from 66 per cent in July to 65.2 per cent in August.

In NSW, the participation rate plunged by 2.5 percentage points as people abandoned the labour force en masse.

EY chief economist Joanne Masters said while a drop in the headline unemployment rate would normally be a positive sign, the latest jobs report was “not a good news story”.

“Clearly those people that have lost their jobs are not looking for new ones – likely because those sectors of the economy are closed so there are no job prospects – and so are counted as leaving the workforce rather than being unemployed,” Ms Masters said.

The drop in the labour force was amplified by the temporary suspension of job-search requirements for those on unemployment benefits living in designated Covid hotspots.

 

The hit to jobs from Delta lockdowns was revealed in a 3.7 per cent plunge in monthly hours worked nationally – more than three times the relative drop in employment and equivalent to 66 million hours of lost work – driven by a severe 6.5 per cent drop in hours worked in NSW.

Other states and territories that were in lockdown for some part of the first two weeks of Aug­ust (when the ABS conducted its survey) also recorded large falls in hours worked, including Victoria (-3.4 per cent), Queensland (-5.3 per cent) and the ACT (-2.5 per cent).

Underemployment – those with jobs who would like to work more – climbed from 8.3 per cent in July to 9.3 per cent.

It was the third consecutive lift in underemployment, which dropped to a multi-year low of 7.4 per cent in May.

Further evidence of the hit to work from lockdowns were the 1.8 million people classified as employed by the ABS, but who worked reduced or zero hours for economic or other reasons – ­triple the number in August 2019 before the pandemic struck.

ANZ senior economist Catherine Birch said she still expected the unemployment rate to climb in coming months, but it would “likely peak after restrictions are eased, if participation initially recovers more quickly than employment, as it did following the national lockdown last year”.

Economists remained hopeful that the labour market would quickly recover once restrictions end.