Australian employment held up better than expected in July rising by 2.2k, with the reference period of the survey coming ahead of the full severity of the Delta disruption. The national unemployment rate declined to a new post-GFC low, though this was driven by a weaker participation rate as a significant number of workers exited the labour force in New South Wales due to the lockdown in Sydney. Hours worked nationally recorded a modest fall in the month as the hit from Sydney lockdown was offset by the reopening from Melbourne's 4th lockdown.
Labour Force Survey — July | By the numbers
- Employment (on net) lifted by 2.2k compared to an expected fall of 43.1k as June's outcome was left unrevised at a gain of 29.1k.
- Australia's unemployment rate fell from 4.9% to 4.6% — its lowest since December 2008 — against an expected uptick to 5.0%.
- Labour force participation weakened from 66.2% to 66.0%, driven by a significant fall in NSW of 1ppt to 64.9%.
- Hours worked nationally were 0.2% lower in July, slowing growth over the year from 6.7% to 5.7%. The Sydney lockdown sent hours worked in NSW down by 7%m/m but was offset by Victoria (9.7%m/m) reopening from lockdown 4.
Labour Force Survey — July | The details
Timing played a large role in the outcomes in today's report. As highlighted in the preview, during the reference period (4-17 July), Sydney was in lockdown but stay-at-home mandates were lifted early in the month in Brisbane, Perth and Darwin. Meanwhile, Victoria was between lockdowns 4 and 5. Thus the severity of the impact on the data from the Delta disruption will intensify from here. For July, employment was up by 2.2k leaving it at 1.2% above its pre-pandemic level. While employment fell sharply in NSW (-36.4k), this was offset by gains in most of the other states, led by the reopening in Victoria (16.0k).
On a compositional basis, the recent surge in full-time employment cooled, falling by 4.2k in the month in the segment's weakest outturn since March. Employment in part-time lifted by 6.4k but this was after a 22.5k fall in June and the segment has seen only limited growth year to date, up just 13.9k compared to 273.4k in full time.
Despite the small rise in employment, Australia's unemployment rate fell by 0.3ppt to 4.6% to be at its lowest since December 2008. The key factor was a decline in the level of participation, from 66.2% to 66.0%. This was driven by New South Wales where the Sydney lockdown led to participation in the state falling from 65.9% to 64.9%. In level terms, the labour force in New South Wales contracted by 63.6k but increases in most of the other states restricted the fall in the national labour force to -37.7k. Despite employment falling in New South Wales by 36.4k, the state's unemployment rate actually lowered from 5.1% to 4.5%, reflecting the larger drop in participation.
As occurred last month, both underemployment (8.3%) and underutilisation (12.9%) increased as unemployment fell. This reflects the impact of the lockdowns on activity with mobility restrictions preventing many people from going to work.
In June, total hours worked fell by 1.8% as Victoria was in lockdown (-8.4%). This month, hours worked nationally fell by 0.2% (5.7%yr) amid significant state volatility. Hours worked plunged in NSW (-7.0%) as Sydney's lockdown was extended, but this was offset by Victoria reopening from lockdown 4 (9.7%).
Hours worked in Australia in July softened to be 0.7% above their pre-pandemic level and will fall well below that baseline in August when around 60% of the population was in lockdown.
Labour Force Survey — July | Insights
Today's report contained significant volatility but the overall theme is that momentum in the labour market stalled in July and is about to roll over. Since July's survey, Sydney's lockdown has broadened out to cover the entire state and restrictions have returned and tightened in Melbourne. Several other states have also been affected by lockdowns, but for short periods. The most optimistic angle that can be put forward is that the labour market is at least entering this period of disruption from a strong starting point.