The figures from the Australian Bureau of Statistics (ABS) were slightly more positive than economists predicted, but the Greater Sydney lockdown has warped the labour market. 

Hours worked in New South Wales fell by 7.0% and the labour force reduced by 64,000 people, offsetting increases in employment and hours seen in Victoria.

Bjorn Jarvis, head of labour statistics at the ABS, said a common trend in the pandemic has been large falls in participation and unemployed people leaving the labour force. 

"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," Mr Jarvis said. 

According to the ABS, unemployment fell by 27,000 people in NSW and by 13,000 people in Victoria. 

"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," Mr Jarvis said.

"This means that people are falling out of the labour force."

Nationally, the national participation rate fell by 0.2 percentage points to 66.0%, driven largely by a 1.0 percentage point fall in NSW's participation rate. 

Callam Pickering, APAC economist at global job site Indeed, said the figures showed Australia had a two-speed economy. 

"Lagging behind we have New South Wales and Victoria, both trying desperately to contain the latest COVID outbreaks. Sprinting ahead we have the rest of the country where employment continues to rise strongly," Mr Pickering said.

"The near-term outlook for jobs will be lockdown dependent. We’d expect this two-speed economy to continue, with jobs growth strong outside of the major lockdown regions.

"We expect further job losses in New South Wales, centered on Sydney."

Average weekly earnings increases to May

Average weekly ordinary time earning for full-time adults was $1,737 in May, up 1.5% from November, according to the ABS. 

Tasmania saw the largest growth in weekly earnings, up 2.2%, while the Northern Territory was the only state or territory to go backwards, with earnings declining 0.5%. 

Mr Jarvis said the latest figures represented a return to normalcy in average weekly earnings since the pandemic began.

"In May 2020 we saw a major compositional shock in the labour market, with low paid jobs particularly affected by both job losses and government support," Mr Jarvis said.

"This led to a larger than usual increase in average weekly earnings at that time, which translated into a decline in average earnings in November 2020, as low paid jobs returned."

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