NSW labour force contracted by 64,000 in July

Lockdowns in Greater Sydney and surrounds led to a large monthly decline in the NSW labour force in July, although a large decline in people looking for work meant the state's employment rate was down by only 0.6 percentage points.

Australian Bureau of Statistics (ABS) head of labour statistics Bjorn Jarvis said the data coincided with the early weeks of the Greater Sydney lockdown, increased restrictions in other parts of New South Wales, and a series of changes in restrictions in other parts of the country.

"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," Jarvis said.

He said New South Wales accounted for 31.8 per cent of national employment and Victorians accounted for 26.5 per cent

"Large changes in these two states are important in understanding changes in the Australian labour market," he said.

"Hours worked data continues to provide the best indicator of the extent of labour market impacts from lockdowns.

"In New South Wales hours worked fell by 7.0 per cent in July, compared with a 0.9 per cent fall in employment. This highlights the extent to which people in New South Wales had reduced hours or no work through the early stages of the lockdown, without necessarily losing their jobs."

This decline in hours worked in Australia's most populous state offset gains in the same period for Victoria.

Nationwide the unemployment rate stood at 4.6 per cent, representing a 0.3 percentage point reduction month-over-month and a 2.8 percentage point cut year-on-year. However, Jarvis emphasised this 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," he said.

The youth unemployment rate remained at 10.2 per cent, while the underemployment rate was 8.3 per cent - a slight reduction month-over-month. NSW had the highest levels of underemployment at 9.3 per cent, followed by South Australia (8.4 per cent), and Victoria and Tasmania both with 8.2 per cent.

Seasonally adjusted employment in Australia increased by 2,000 people between June and July, but hours worked fell by 0.2 per cent. In terms of gender, between June and July there were 26,300 fewer females employed nationwide, and 6,100 more males employed.

"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," Jarvis said.

"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.

"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."